[News] Global Rate-Cutting Cycle Begins, as Gold Prices Continue to Hit Record Highs

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On October 21, gold futures on the New York Mercantile Exchange closed at $2,734.50, continuing to reach new all-time highs.

As one of the world’s primary safe-haven assets, gold has risen by over 30% so far this year. This increase mainly reflects the fact that major global economies have entered an interest rate-cutting cycle due to weakened economic outlooks. In addition, rising tensions in the Middle East and uncertainty surrounding the U.S. election have further driven gold prices upward.

 

Interest rates are a key factor in the pricing of all assets, but they are especially important for gold, as it does not provide interest or dividend income. As a result, gold’s price is highly sensitive to interest rate fluctuations.

The real interest rate (nominal interest rate minus inflation) is the key factor influencing gold prices. Typically, when real interest rates rise, gold’s attractiveness decreases relative to higher-yielding assets, leading to a drop in its price. Conversely, when real interest rates fall or turn negative, gold’s appeal as a safe-haven asset increases, pushing its price higher.

According to economic forecasts from major central banks, global interest rates are expected to decrease by 75 to 125 basis points by 2025. Therefore, the upward trend in gold prices is likely to continue through 2025.

(Source: Fed, ECB, BOE, RBA, S&P Global, TrendForce)