VINACHEM

Gold prices rose to record highs in Asian trade on Wednesday, extending a strong run of recent gains amid growing optimism that the Federal Reserve will cut interest rates in September.

Spot prices rose 0.2% to  a record high of $2,478.65 an ounce, while gold futures expiring in August hit a record high of $2,483.65 an ounce.

Gold buoyed by rate cut bets 

Gains in gold were driven chiefly by increased optimism over interest rate cuts by the Federal Reserve.

Soft consumer price index inflation data and dovish-leaning signals from the Fed saw traders widely positioning for a September rate cut.

Traders were seen pricing in an over 90% chance for a 25 basis point cut in September, and a small possibility of a 50 basis point cut, according to CME Fedwatch. They were also no longer pricing in the possibility that the Fed will stay on hold.

Fed Chair Jerome Powell said this week that the Fed was growing increasingly confident that inflation was easing further. He had also earlier signaled that the central bank did not need to see inflation reach its 2% target to begin cutting interest rates.

Muted retail sales data on Tuesday furthered the notion that the U.S. economy was cooling, even as the reading came slightly higher than expected.

Lower rates bode well for gold and other precious metals, given that they present a lower opportunity cost of investing in the sector.

The dollar sank to over one-month lows on the prospect of lower rates, further benefiting precious metal prices. Other precious metals also rose tracking a weaker dollar, with platinum futures up 0.1% at $1,016.80 an ounce, while silver futures rose 0.3% to $31.543 an ounce.

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