By Polina Devitt

LONDON (Reuters) – Gold prices hit a record high on Tuesday as a weaker dollar and buying by Western investors extended the precious metal’s rally amid bets the U.S. Federal Reserve will cut interest rates in September.

was up 1.0% to $2,528.38 per ounce by 1254 GMT, surpassing a previous record hit on Friday. London’s gold price benchmark hit an all-time high of $2,521.55 per ounce at a morning auction on Tuesday, the London Bullion Market Association (LBMA) said.

The dollar touched a seven-month low on Tuesday with traders bracing for comments from Federal Reserve Chair Jerome Powell on Friday. [FRX/]

“Gold is effectively trading in line with expected cross-asset correlations, albeit being driven more by the FX side rather than rates at the moment,” said Marcus Garvey, head of commodities strategy at Macquarie.

“From a flow perspective, it’s quite notable that it’s coming much more from Western investor buying than anything else,” he added.

The Chinese gold price arbitrage is weak with the Shanghai Futures Exchange price trading below the Comex price as high prices have muted demand in China, the top gold consumer, in recent months.

Meanwhile, Swiss July gold exports rose to the highest since April as higher supplies to India and Britain offset reduced shipments to China, customs data showed.

With 22% price growth so far this year, non-yielding bullion is heading for its best year since 2020, while from the technical point of view, gold’s Relative Strength Index, currently at 68, sees it gradually approaching the “overbought” zone which starts at 70.

“Although there is plenty of scope for length to be added, and gold ETFs (exchange-traded funds) inflows are still modest, discretionary positioning is relatively long, creating some downside risks ahead of Powell’s speech. Nevertheless, it’s still a very constructive structural backdrop for the gold market,” Garvey said.

Holdings of SPDR Gold Trust (P:), the world’s largest gold-backed ETF, jumped to their highest level in seven months at 859 tons on Monday. [GOL/ETF]

Among other metals, spot silver rose 1.3% to $29.87 per ounce, platinum gained 1.2% to $964.55 and palladium was up 1.4% at $944.75.