Gold Hits Record High as Investors Bet on Rate Cuts

17 Jul 2024 , 10:02 AM

On Wednesday, gold reached a new high and bonds rose as markets braced for a drop in global interest rates, while stocks in Taiwan fell as U.S. presidential candidate Donald Trump expressed scepticism about the island’s defence.

The S&P 500 hit new highs overnight, as Asian futures remained stable. MSCI’s broadest index of Asia-Pacific shares outside Japan remained unchanged, while Japan’s Nikkei climbed 0.1%.

In Taiwan, chipmaker TSMC slumped 2%, wiping out about $16 billion in market value, after Trump questioned US backing in an interview with Bloomberg Businessweek, claiming that Taiwan should pay for US defence.

It was unclear what Trump was intending, but his choice of trade hawk J.D. Vance as his running mate had already alerted markets that China would play a significant role in his foreign policy decisions.

Chinese stocks were lower for the second day in a row.

The Taiwan dollar fell marginally, reaching a two-week low. China’s yuan remained stable at 7.2676 per dollar.

Treasuries maintained gains that had pushed 10-year US rates to four-month lows overnight, after Federal Reserve Chair Jerome Powell stated that recent softening in inflation readings “add somewhat to confidence” that consumer prices are under control.

Fed funds futures have completely priced a US rate drop in September, followed by two more by the end of January 2025.

Ten-year rates were unchanged at 4.175%, while two-year yields lingered at 4.445%. Bond markets in Australia, Japan, and South Korea have rallied.

Lower yields aided gold’s rapid rise overnight, breaking through chart barrier around $2,450 per ounce despite a generally firm dollar. On Wednesday, it reached a record high of $2,478 in Asia trade.

British inflation data is anticipated later in the day, with the attention shifting to services inflation, which is predicted to remain high at 5.6% in June compared to the previous year.

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