Gold Hits All-Time High Amid Weak Dollar and Easing Inflation; Silver Follows Suit

Gold prices (XAU/USD) surged to an all-time high of $2,583.37 during Friday's European session, driven by a weaker U.S. Dollar and falling Treasury yields. The rally follows Thursday’s softer-than-expected U.S. Producer Price Index (PPI) report, which signaled easing inflationary pressures. Investors are increasingly speculating that the Federal Reserve will implement a significant interest rate cut in September, bolstering the appeal of non-yielding assets like gold.

The PPI report showed a modest 1.7% annual increase, below the anticipated 1.8%, while the core PPI, excluding food and energy, rose by 2.4%, missing the forecast of 2.5%. Additionally, U.S. unemployment claims came in at 230,000, suggesting a mild softening in the labor market. As a result, the U.S. Dollar fell to its weekly low, with Treasury yields remaining near their 2024 lows, both of which have contributed to the growing interest in gold.

Rising Geopolitical Tensions Boost Gold’s Safe-Haven Appeal

Beyond economic data, ongoing geopolitical tensions in the Middle East and the prolonged conflict between Russia and Ukraine are also contributing to gold's bullish momentum. Israeli airstrikes in Gaza, which have killed dozens of Palestinians, including United Nations staff, have heightened geopolitical instability. As conflicts escalate, gold's status as a safe-haven asset becomes even more attractive to global investors seeking refuge from uncertainty.

In response to the Middle East crisis, the U.S. Navy has announced the return of the USS Theodore Roosevelt, signaling heightened concerns over potential regional conflict. This geopolitical uncertainty is expected to further bolster gold prices as investors look for stability.

Silver Follows Gold’s Lead, Hits New High on Industrial Demand and Rate Cut Speculation

Silver prices (XAG/USD) continued their upward trend, reaching $30.64, a gain of 2.57% during Friday's session. Silver’s rise is supported by increasing industrial demand, particularly from the renewable energy sector, where silver is crucial in solar panel production. Additionally, rate cut expectations from the Federal Reserve are also fueling the metal's appeal as a non-yielding asset.

The Fed is expected to announce a potential 50 basis point rate cut in its upcoming meeting next week, adding to the bullish sentiment for silver. The CME FedWatch Tool now suggests a 41% likelihood of this rate cut, up from 14% earlier in the week.