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Mining stocks have gained momentum following a record high in gold prices, which reached US$2,568 (£1,957) per ounce.
Fresnillo PLC (LSE:FRES) saw a 2.5% increase, Endeavour Mining PLC (LSE:EDV) rose by 2.1%, Glencore PLC (LSE:GLEN) was up 1.4%, and Antofagasta PLC experienced a 1.3% gain. The surge in gold prices comes as the US dollar begins to weaken, driven by growing expectations of an interest rate cut from the US Federal Reserve.
This shift follows a series of macroeconomic data indicating that the US economy may be cooling sufficiently to warrant a reduction in monetary policy rates. Lower interest rates can enhance the appeal of precious metals like gold, as they often become more attractive compared to cash and bonds, which may offer reduced returns in a low-rate environment.
Russ Mould, investment director at AJ Bell, highlighted that lower rates are a significant factor driving the rise in gold prices. He noted that the precious metal's appeal increases as it outperforms traditional assets such as cash and bonds when interest rates decline. Additionally, central banks have been active in purchasing gold, further supporting its price.
Gold’s all-time high has also been influenced by its role as a safe haven asset. Ongoing geopolitical tensions, including conflicts in Ukraine and the Middle East, along with uncertainties surrounding the upcoming US presidential election, have heightened demand for gold as a secure investment option.
