Gold prices surge as Powell hints at potential rate cut

U.S. gold futures closed 0.9% higher at $2,473 per ounce.

Gold prices rose on Wednesday following Federal Reserve Chair Jerome Powell's comments suggesting that an interest rate cut could be considered as early as September if inflation remains on target.

Spot gold increased by 1.2%, reaching $2,437.39 per ounce, marking its largest monthly gain since March with an over 4% rise. U.S. gold futures closed 0.9% higher at $2,473 per ounce.

Powell's remarks, made during a press conference after the Fed decided to keep its benchmark interest rate unchanged, boosted investor expectations for a potential rate cut. He noted that policymakers are growing more confident that inflation is steadily moving towards the 2% target.

"Gold and silver are rallying as Chair Powell's comments suggest a September rate cut is likely," said Tai Wong, an independent metals trader based in New York. "However, he effectively ruled out a 50 basis point cut. It remains to be seen if gold can reach new all-time highs, given the Fed's recent adjustment of expectations."

The demand for gold was further supported by heightened geopolitical risks in the Middle East. The assassination of Hamas leader Ismail Haniyeh in Iran on Wednesday has intensified tensions in a region already troubled by the Gaza conflict and ongoing unrest in Lebanon. Bob Haberkorn, senior market strategist at RJO Futures, suggested that if the Fed cuts rates and Middle Eastern geopolitical risks persist, gold prices could potentially reach up to $2,700 an ounce.

The U.S. dollar slightly reversed its losses after the Federal Reserve’s rate decision, while the benchmark U.S. 10-year Treasury yields declined.

Spot silver rose 1.6% to $28.85 per ounce. Platinum increased by 2.1% to $979.05, and palladium climbed 4.6% to $928.50. Despite these gains, all three metals are on track for monthly declines.