Gold price hits record high; global markets rally on ‘soft landing’ hopes – business live

Gold hits record high, meaning gold bars worth over a million dollars

Newsflash: the gold price has hit a new alltime high.

Spot gold has risen over its previous record high, set last Friday, to trade at $2,513.79 per ounce this morning.

This extends its recent gains, as gold has been lifted by expectations of cuts to US interest rates starting in September.

Falling interest rates support the gold price, as they make alternative assets such as bonds and cash reserves – which pay interest – less attractive.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, says:

The recent demand boom can be put down to growing expectations that the US Fed is set to cut interest rates in the coming months. Add in central bank buying, demand for portfolio hedges, and global uncertainty; it’s been a recipe for strong demand over the year.

Gold has now risen almost 22% so far this year. And it may have further to rise, with investment bank UBS forecasting prices could reach $2,600 an ounce by the end of 2024.

At current levels, a standard bar of gold is worth one million dollars.

Bloomberg explains:

With gold bars typically weighing about 400 ounces, that would make each one worth more than $1 million.

Gold Bars Are Worth a Million Dollars for the First Time

The common 400 troy ounce (12.4 kg) gold bar is worth a million dollars nowhttps://t.co/LFHfax50Yx

— Amit Paranjape (@aparanjape) August 20, 2024

Key events

The spot price of gold is continuing to climb – and just hit $2,520.67 per ounce.

Rate cut hopes, the weaker US dollar, geopolitical instability, demand from some central banks, and the pursuit of safe assets have combined to push gold to its record high today.

So explains Ernesto Di Giacomo, senior market analyst at brokerage XS.com:

One of the main drivers behind this historic surge has been the expectation of a more dovish monetary policy from the U.S. Federal Reserve. With the possibility of further interest rate cuts and increased quantitative easing, financial markets have responded predictably, driving up the price of safe-haven assets like gold. The prospect of a weakened dollar has made gold more attractive to both domestic and international investors.

Additionally, instability in geopolitically sensitive regions, such as Ukraine and the Middle East, has significantly contributed to this rise. Ongoing tensions in these areas have created an environment of uncertainty, leading investors to seek refuge in gold, considered a safe asset in times of crisis. Geopolitical instability has acted as a catalyst, further boosting the demand for this precious metal.

Another critical factor has been the decline in bond yields and the dollar’s depreciation. With falling bond yields, investors have sought alternatives that offer greater security and returns. In this context, gold has emerged as a standout option, attracting a growing number of investors. Moreover, a weaker dollar has made gold more accessible to buyers outside the United States, further driving its demand in international markets.

So far this year, gold has experienced a more than 20% increase, a notable growth driven by central bank purchases and strong demand in China. Central banks, seeking to diversify their reserves, have increased their gold acquisitions, while Chinese demand for jewelry and investment remains robust. This behavior has significantly contributed to the sustained increase in gold prices in global markets.

Gold hits record high, meaning gold bars worth over a million dollars

Newsflash: the gold price has hit a new alltime high.

Spot gold has risen over its previous record high, set last Friday, to trade at $2,513.79 per ounce this morning.

This extends its recent gains, as gold has been lifted by expectations of cuts to US interest rates starting in September.

Falling interest rates support the gold price, as they make alternative assets such as bonds and cash reserves – which pay interest – less attractive.

Matt Britzman, senior equity analyst at Hargreaves Lansdown, says:

The recent demand boom can be put down to growing expectations that the US Fed is set to cut interest rates in the coming months. Add in central bank buying, demand for portfolio hedges, and global uncertainty; it’s been a recipe for strong demand over the year.

Gold has now risen almost 22% so far this year. And it may have further to rise, with investment bank UBS forecasting prices could reach $2,600 an ounce by the end of 2024.

At current levels, a standard bar of gold is worth one million dollars.

Bloomberg explains:

With gold bars typically weighing about 400 ounces, that would make each one worth more than $1 million.

Gold Bars Are Worth a Million Dollars for the First Time

The common 400 troy ounce (12.4 kg) gold bar is worth a million dollars nowhttps://t.co/LFHfax50Yx

— Amit Paranjape (@aparanjape) August 20, 2024

Sweden’s Riksbank cuts interest rates

Newsflash: Interest rates have been cut in Sweden.

The Riksbank has lowered its policy rate by a quarter of one percent, to 3.5%.

It has also hinted it could make three more rate cuts this year – more than previously expected – saying:

Inflation is in the process of stabilising at the target and economic activity is weak.

The Executive Board has decided to cut the policy rate by 0.25 percentage points to 3.5 per cent. If the inflation outlook remains the same, the policy rate can be cut two or three more times this year, which is somewhat faster than the Executive Board assessed in June.

The UK government is to hold talks with unions this week over pay rises for rail workers and seafarers, as it tries to end industrial unrest and stimulate growth.

The Rail, Maritime and Transport union (RMT) will meet with officials at the Department for Transport on Tuesday to discuss a pay rise for its members at train-operating companies.

The union will be seeking a deal for this year, without any changes to terms and conditions, PA Media reports.

The RMT will also meet Network Rail on Thursday to discuss pay, and will also hold talks later this week with the Ministry of Defence to try to resolve a pay dispute at the Royal Fleet Auxiliary (RFA).

RMT general secretary Mick Lynch said that all offers would be dealt with by the union after talks are completed.

He said:

“We really need to move on from the belligerent and hostile attitude of the last government and reset industrial relations to allow rail workers and RFA seafarers to get on with the job.”

The meetings follow a suggested deal aimed at ending the long-running train drivers’ pay dispute.

Members of the Aslef union are being recommended to vote in favour of a three-year increase worth over 14%.

European stock markets have opened mostly higher, with the pan-European Stoxx 600 index gaining 0.3% in early trading.

Germany’s DAX and France’s CAC are both 0.3% higher.

But in London, the FTSE 100 has dipped by 14 points or 0.15%. Shell and BP are among the fallers, tracking the decline in the oil price.

Over in Italy, as fresh search is underway for six people – including tech entrepeneur Mike Lynch – after the Bayesian yacht capsized off Sicily before dawn on Monday.

Lynch’s 18-year-old daughter Hannah, Morgan Stanley International chairman Jonathan Bloomer, and Clifford Chance lawyer Chris Morvillo are also among those missing.

China’s July oil imports from Russia fall 7.4%

Speaking of oil….China’s crude imports from top supplier Russia have fallen.

Official data shows that China imported 7.4% less oil in July than a year ago.

Russian oil arrivals, including via pipelines and shipments, totalled 7.46m metric tons last month, or 1.76m barrels per day (bpd), according to data from the General Administration of Customs.

That’s lower than the 1.9 million bpd recorded in July 2023, as well as June’s 2.05 million bpd.

That suggests weaker demand for energy in China, as its economy remains subdued – as export growth slows and factory activity weakens.

This will also make a dent in Moscow’s revenues; Russia has redirected its oil exports from Europe to China, and India, after Western countries imposed sanctions following its invasion of Ukraine.

Oil drops on hopes of easing Middle East tensions

Oil is not joining the rally, though.

Brent crude, the international benchmark, has dropped 0.5% this morning to a near-two-week low of $77.29 per barrel.

That adds to its $2/barrel fall on Monday, on hopes of success in the Middle Eastern peace talks.

US secretary of state Antony Blinken is visiting the region, again; yesterday he met with Israel’s prime minister Benjamin Netanyahu for three hours. Netanyahu’s office says the meeting was “positive and conducted in a good spirit”.

Kyle Rodda, senior financial market analyst at Capital.com, says:

Reports that the US have cajoled Israeli Prime Minister Benjamin Netanyahu into a ceasefire agreement raised hopes of a de-escalation in the Israel-Gaza war.

The markets remain on the lookout for potential reprisals from Iran on Israel for the assassination of Ismail Haniyeh, which could reinflame tensions. Regarding a potential ceasefire, the onus shifts to Hamas and whether it accepts the arrangement.

Introduction: Markets lifted by soft-landing hopes

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Global stocks continue to push higher, on hopes that policymakers are executing a ‘soft landing’ in their battle against inflation.

After gains on Wall Street last night, shares across Asia have hit a one-month high today – as investors continue to move on from the volatility that gripped markets last week.

MSCI’s index of Asia-Pacific shares outside Japan hit a one-month high, before dipping back slightly, while Japan’s Nikkei has surged by 1.8%, or 674 points, up to 38,062 points.

The rally is being driven by expectations that the US Federal Reserve will start to cut its key policy rate next month, and that America will dodge a recession.

Jerome Powell, the head of the US Federal Reserve, could cement those hopes – or shake them – when he speaks at a major economic symposium in the Rocky Mountains resort of Jackson Hole on Friday.

Ipek Ozkardeskaya, senior analyst at Swissquote Bank, says:

The week kicked off on a positive note on expectation that when Federal Reserve (Fed) Chair Jerome Powell speaks at the Jackson Hole meeting on Friday, he will deliver a strong hint that the rate cuts will begin soon in the US.

How soon? Probably in September? By how much? Probably a reasonable 25bp? Would the markets be upset with the idea of a 25bp cut instead of a 50bp? Probably not, because a 50bp cut would require a severe economic slowdown, a crisis or a panic mode, which is not good for risk appetite.

Therefore, the best of both worlds would be the hint of a 25bp cut that would keep the market mood in the sweet soft-landing spot. And this is what investors hope to hear.

European markets are set for a mixed open, with Germany’s DAX being called higher but the FTSE 100 expected to fall a little.