This year has been great for gold prices, as the precious metal has broken price records repeatedly throughout 2024. As of September 25th, the most traded gold futures contract has reached a new record price of $2,687.30.
This record-breaking price was set after the United States Federal Reserve slashed interest rates in the US by a half point.
As we have continuously explained through our coverage of gold prices, precious metal is seen as a haven and commodity that can protect investors against recessions and economic crises. This year, however, its price has increased by almost 30 percent. This means gold effectively outperformed the S&P 500 index’s 20 percent projection by a 10 percent margin.
The increase in gold prices has been driven in part by demand from central banks
Central banks from countries such as China, Turkey, and India have been largely responsible for the rise of gold prices, thanks to their aim to diversify away from the US dollar, but they are not the main reason why prices have risen.
Some investors have suggested that the reason why gold prices are so high is that the global economy and global markets are still wary of the state of the US economy.
As previously explained, investors and traders tend to go towards gold during periods of uncertainty because, more often than not, gold value will hold up better than other assets, such as stocks.
On Monday, September 23rd, researchers at JP Morgan Chase suggested that gold prices will continue to increase in 2025. They expect the precious metal to reach its 2025 price goal of $2,850 per ounce, thanks to the Federal Reserve bringing down rates.
Experts say the cut-off of rates will also cause the gold allure to increase over treasuries, attracting more and more investors to buy the precious metal.
Economic uncertainty is expected to carry on well into 2025 in the United States
Hence, an increase in gold prices is not exactly great news for the US economy, but what do experts have to say about the state of the country’s economy? Chairman of the Federal Reserve, Jerome Powell said during a press conference that a “half-point interest rate cut was intended to get ahead of further labor weakness.”
Nonetheless, economists have warned that even after the cut, the economy has not escaped a crisis, at least not yet. Analysts have pointed out that the unemployment rate is especially difficult to slow down once it climbs up, which is reflected by some of the latest numbers.
For one, in August, the unemployment rate was 4.2 percent but is 3.8 percent higher than just a year ago.
Additionally, consumer data recently released shows that Americans are pessimistic about the US economy and the job market in general. The Conference Board’s monthly confidence index dropped to 98.7 which is lower than expected, given this index was 105.6 in August.
