Gold price hits record all-time high as bets on interest rates shift

The price of gold has reached a fresh peak, and the value of Bitcoin has also experienced a surge.

The increases occur as traders alter their investment approaches, following almost two years during which increasing interest rates stimulated the demand for US dollars and specific types of debt. Investors currently perceive a growing likelihood of interest rate reductions, reigniting interest in alternative assets.

As Asian markets started trading on Monday, the price of gold jumped above $2,000, up 3%, before retreating.

Demand for dollars ticked up again later in the trading session on Monday, helping to push gold into retreat. Many investors holding gold were also taking advantage of the recent highs to sell, analysts said.

The gains have followed a weeks-long climb for the metal, which is seen as a "safe haven" and saw demand rise after the start of the Israel-Gaza war.

The latest rally was sparked by comments on Friday by the head of the US central bank, Jerome Powell.

Last year, the Federal Reserve unsettled financial markets as worries about surging inflation led it, along with central banks globally, to abruptly elevate interest rates to their highest levels in over two decades in an effort to stabilize prices. These actions compelled many investors to reconsider their strategies, as investments traditionally viewed as less risky began to yield higher returns.

But in a speech on Friday, Mr Powell said the Federal Reserve's policy was now "well into restrictive territory" - meaning that rates were now high enough to cool the economy and stabilise prices, without any immediate need for further hikes.

Indeed, traders increasingly expect the bank to actually cut rates starting as soon as March 2024, though Mr Powell has sought to dampen those expectations.

"If signs of low interest rates become more evident, gold should continue to soar next year," Alexander Zumpfe, a precious metals trader at Heraeus, told Reuters.

In recent months, there has been a general upswing in US financial markets, as analysts increasingly believe that the bank will successfully control inflation without causing substantial harm to the American economy.

Why is Bitcoin rising again?

The price of Bitcoin also continues to recover after higher rates and a series of scandals in 2022 helped spark a plunge.

The prominent digital asset briefly surpassed $42,000, marking its highest point since April 2022. Its value has more than doubled since the beginning of the year.

Bitcoin is anticipating a shift in investor sentiment following regulatory actions taken against the leaders of two major cryptocurrency trading companies, FTX and Binance, by US authorities. Approval for new types of Bitcoin-linked trading products by US regulators is anticipated as soon as next month.