Gold price near all-time high on Fed rate cut optimism: Should you buy, sell or hold?

Gold prices fell slightly on Monday (August 19), near the key $2,500 level as traders took profits after the metal rose to an all-time high on Friday (August 16).

The recent rally was driven by expectations of a US Federal Reserve rate cut in September.

At 03:17 GMT, spot gold fell 0.2% to $2,502.78 an ounce, while U.S. gold futures rose 0.2% to $2,541.80 an ounce.

In India, the price of 24-carat gold fell by Rs 353 to Rs 7,201.6 per gram on Monday (August 19).

The trends

The record rise in gold prices, which reached a high of $2,509.65 an ounce last week, was fueled by optimism about the expected Federal Reserve rate cut, rising geopolitical tensions and heavy buying by central banks.

These factors have caused the price of gold to rise by more than 20% so far this year.

“Gold has been chasing the psychological $2,500 mark for several months,” said Tim Waterer, chief market analyst at KCM Trade.

“Now that this target has been achieved, we are seeing natural profit-taking,” he was quoted as saying in a Reuters report.

US economic data and Fed expectations

Recent US economic data, including stronger-than-expected retail sales and lower unemployment figures, together with moderate inflation figures, have renewed confidence in the economy.

This has increased the likelihood of a rate cut by the US Federal Reserve in September; according to the CME FedWatch tool cited in the Reuters report, markets are pricing in a 75.5% chance of a 25 basis point cut.

The mood among investors remains good

Despite Monday's decline, optimistic sentiment in the gold market remains strong.

Holdings of the SPDR Gold Trust, the largest gold-backed ETF, rose nearly 1 percent last Friday.

COMEX gold speculators also significantly increased their net long positions last week.

In addition, several Chinese banks received new gold import quotas.

What should investors do?

With prices hitting record highs globally and MCX futures rising sharply, short-term traders may consider profit-taking.

However, due to central bank demand, potential geopolitical risks and economic uncertainty, gold remains an attractive long-term hedge.

Monitoring global developments, especially the policy decisions of the US Federal Reserve, will be crucial in determining the future development of the gold price.

For long-term investors, gold may still be worth holding, while others may prefer to wait for more clarity at the Fed's Jackson Hole meeting later this week.