US election uncertainty and rate cut expectations push gold price to historic high

On October 17th, the price of gold surged to a historic new high. Market expectations of further interest rate cuts by the Federal Reserve and the uncertainty surrounding the U.S. presidential election have been driving the demand for gold.

Spot gold hit a historic high of $2,688.82 per ounce on that day before experiencing a slight pullback. U.S. gold futures rose by 0.4% to $2,702.20.

Lukman Otunuga, a senior research analyst at the online financial trading platform FXTM, told Reuters, “With less than three weeks until the U.S. election, market cautiousness could remain a key theme. Considering the fierce competition between Trump and Harris, this adds another layer of uncertainty, stimulating demand for safe-haven assets.”

Gold prices have risen by over 30% so far this year, driven by market expectations of further interest rate cuts by the Fed following a substantial cut in September, as well as ongoing geopolitical uncertainties.

On Thursday, the European Central Bank announced a 0.25 percentage point rate cut, bringing rates down to 3.25%. This marks the ECB’s third rate cut this year and the first consecutive rate cuts in 13 years.

Lower interest rates and geopolitical tensions often support gold, which does not yield interest and is considered a safe asset.

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said, “Earlier this week, a LBMA survey released in Miami showed that the market’s fundamental expectation for gold prices is close to $3,000 next year, with silver performing even better, which I believe has attracted some attention.”

Representatives at the annual conference of the London Bullion Market Association, a global authority on precious metals, predicted earlier this week that gold prices will rise to $2,941 per ounce within the next 12 months.