XAU/USD: Gold Touches Record High of $2,600. Turns Out It Was All Fed-Driven Froth.

Bullion skyrocketed to record after US central bank cut rates but the gains faded shortly after.

• Gold XAUUSD shot up to a fresh record of $2,600 per ounce after the keenly-anticipated cut to interest rates from the Federal Reserve ignited a bull run. But only for a while — moments after gold peaked above the milestone, prices imploded and the precious metal was back to where it was before the intraday run had started. In other words, bullion lost its frothy Thursday gains and dived to $2,555 to wrap up the session.
• Nevertheless, the bull market in gold continues. The short-term swing was all but a blip in the long run. Gold boasts gains of more than 25% on the year, outperforming the broad-based S&P 500 index. What’s more, the Federal Reserve’s 50 bps cut to interest rates is generally good for gold, despite the selloff, which could be attributed to traders playing out the “buy the rumor sell the news” narrative.
• Lower interest rates usually benefit gold, which is a non-yielding asset. In other words, the yellow commodity doesn’t generate any yield or pay a dividend. It just kind of sits there. But now when interest rates drop, they decrease the opportunity cost of holding gold — fixed-income assets like bonds return less and the US dollar gets its yield slashed, making it lose some of its appeal.