Gold holds above $2,500 level on Fed optimism

Gold prices were little changed on Tuesday, but held above the $2,500 per-ounce psychological level on investor optimism for imminent US rate cuts.

Spot gold was nearly unchanged at $2,513.74 per ounce, as of 0722 GMT. Prices have risen more than 21 per cent this year, hitting a record high of $2,531.60 on Aug.20. US gold futures fell 0.3 per cent to $2,548.20.

A September US rate cut has been set in stone, but the debate revolving around its size may prompt a wait-and-see mode as investors look forward to upcoming economic data to anchor their views, said IG market strategist Yeap Jun Rong.

Traders see a 70 per cent chance of a 25-basis-point (bp) rate cut and about 30 per cent probability of a bigger 50-bp reduction, according to the CME FedWatch tool.

A low interest rate environment tends to boost non-yielding bullion’s appeal.

San Francisco Federal Reserve President Mary Daly said a quarter-percentage point cut in borrowing costs next month was likely.

“We expect the upward trend for gold prices to persist, given its positive performance in past Fed rate-easing cycles, healthy central bank demand and its status as a good hedge against geopolitical and economic risks,” Yeap said.

Residents of Lebanese cities felt only partial relief on Monday that one of the biggest exchanges of fire between armed group Hezbollah and the Israeli military the previous day was over, worn down by the relentless tension of 10 months of conflict.