Gold price today: Yellow metal surges to new all-time high on Fed rate cut expectations; silver falls 1.2%

Gold prices continued to climb to a new all-time high on Wednesday, driven by increasing optimism for an interest rate cut by the U.S. Federal Reserve in September and a weaker dollar boosting demand.

As of 1402 GMT, spot gold rose 0.5 per cent to $2,480.75 per ounce, after reaching an all-time high of $2,482.29 earlier in the session. U.S. gold futures increased by 0.7 per cent to $2,485.30.

"The expectation that we are getting closer to a Fed interest rate cut and we've seen this as yields continue to slowly grind lower in anticipation, that, along with a weaker dollar, are the main supportive factors behind this gold move," David Meger, director of alternative investments and trading at High Ridge Futures, was quoted as saying by Reuters.

What's weighing on gold prices?

More Fed policymakers have indicated increasing confidence that the pace of price increases is steadily aligning with the Fed's target, following higher-than-expected readings earlier in the year.

Fed Governor Christopher Waller mentioned that the time for a U.S. central bank interest rate cut "is drawing closer," though the uncertain economic outlook makes the timing of such a cut unclear.

Data showed that U.S. factory production rose more than expected in June, contributing to a solid rebound in output for the second quarter.

According to the CME FedWatch Tool, markets now see a 98 per cent chance of a U.S. rate cut in September.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion and weaken the dollar, making gold cheaper for investors holding other currencies.

The U.S. dollar weakened by 0.5 per cent, nearing a four-month low against a basket of currencies.

Elsewhere, silver fell 1.2 per cent to $31.01 per ounce, platinum rose 1.3 per cent to $1,013.07, and palladium remained steady at $959.25.

(With inputs from Reuters)