Gold Soars Past $2,755: Is There More Room to Rise?

On Wednesday (October 23rd), international gold prices soared to an all-time high, driven by demand for safe-haven assets amid Middle Eastern conflicts. As of press time, the spot gold price stood at $2,755, having earlier reached an all-time peak of $2,758.33.

Meanwhile, the US dollar rose to a two-and-a-half-month peak as investors adjusted their expectations for a gradual reduction in interest rates. The dollar has been on a three-week winning streak, reaching its highest point since August 2nd at 104.19, following a series of positive economic data that diminished market expectations for aggressive rate cuts by the Federal Reserve.

The Federal Reserve initiated its easing cycle last month with a 50 basis point rate cut. The likelihood of a similar move in November has completely faded, but the CME FedWatch tool shows that the market now estimates a 91% probability of a modest 25 basis point rate cut in November. A month ago, investors were still divided between bets on 50 basis point and 25 basis point rate cuts. This expectation has driven Treasury yields higher, with the benchmark 10-year Treasury yield reaching its highest point since July 26th at 4.222% on Tuesday.

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"Despite rising real and nominal yields, a stronger dollar, and US stocks hitting new highs, gold still climbed to new highs," analysts at Standard Chartered noted in a report. "Gold's ability to capture the trend driving price increases, regardless of the macroeconomic backdrop, indicates that the market still favors potential inflows of funds into gold."

"Gold prices rising regardless of the macroeconomic backdrop indicate that the market continues to see positive fundamental capital flows," Standard Chartered analyst Suki Cooper wrote in a report. She also expects further risks of gold price increases in the coming weeks. The bank forecasts that the average gold price for the fourth quarter will reach $2,800, and the average for the first quarter of 2025 will reach $2,900.

Furthermore, investors are assessing the possibility of a comprehensive Republican victory, which is widely considered the most dollar-friendly election scenario.

City Index's senior market analyst, Matt Simpson, stated that the market still has "ample time" to reprice. "If the market anticipates a Harris victory, considering her policies are thought to have a smaller inflationary effect, the dollar and yields may experience some pullback."

"Both presidential candidates have proposed policies with inflationary effects, which will be very beneficial for gold. Although some have already been digested by the market, this will also provide continuous support for price increases," said Michael Langford, Chief Investment Officer at Scorpion Minerals.Gold is considered a tool to hedge against economic and geopolitical uncertainty.

Spot silver fell by 0.4% to $34.68, after reaching its highest point since the end of 2012 at $34.87 in the previous trading session.

"The physical shortage of silver provides strong support for its price," Langford said.