Expectations of Fed rate cuts rise, hedge funds increase bullish bets on gold to four-year highs

Fund managers' bullish bets on gold have surged to the highest level in over four years, as they anticipate the Federal Reserve to cut interest rates earlier and by a larger magnitude to boost the economy. Weekly data released by the U.S. government on Friday showed that hedge funds and other large speculators increased their net long positions on gold by 7.8% to 236,749 contracts as of August 20, the highest level since the beginning of 2020. With expectations of a Fed rate cut looming, gold broke above $2500 per ounce for the first time this month. Rate cuts are typically favorable for non-interest-bearing gold. Federal Reserve Chairman Powell emphasized in his speech on Friday that the time for policy adjustments has come, signaling an imminent rate cut to the market. Following Powell's speech, the probability of a 25 basis point rate cut by the Fed in September stood at 67.5%, while the probability of a 50 basis point cut was at 32.5%. On Friday, COMEX December gold futures closed up 1.20% at $2546.80 per ounce, with a weekly gain of 0.39%; COMEX September silver futures closed up 2.78% at $29.855 per ounce, with a weekly gain of 3.50%