Gold prices surged to yet another record high on Monday, buoyed by mounting expectations of interest rate cuts by the U.S. Federal Reserve and the enduring allure of the precious metal as a haven during uncertain times.
Spot gold rallied by 1.32%, reaching $2,265.53 per ounce, while U.S. gold futures surged over 2%, hitting $2,286.39 per ounce.
Joseph Cavatoni, a market strategist at the World Gold Council, expressed enthusiasm about the current trajectory of gold. Speaking to CNBC, he remarked, “I think it’s a really exciting moment in gold… What’s really driving it is, I think, many market speculators really getting that confidence and comfort [in] the Fed cuts.”
Anticipation for a rate cut from the Federal Reserve in either May or June is rife among market observers. The latest data, released last Friday, revealed that the key Fed inflation gauge for February had climbed by 2.8% year-on-year, a factor likely to keep the U.S. central bank cautious before considering any interest rate adjustments.
Although the Fed opted to maintain interest rates at its recent March meeting, it adhered to its projection of three interest rate cuts throughout the year.
Gold prices traditionally exhibit an inverse relationship with interest rates, with a decrease in rates making gold more attractive compared to fixed-income assets such as bonds, which would offer diminished returns in a low-interest-rate environment.
Caesar Bryan, a portfolio manager at Gabelli Funds, attributed the upward trajectory of bullion prices to heightened demand from overseas markets. He noted, “In China, private investors have been attracted to gold because the real estate sector has done poorly,” highlighting the economic challenges faced by China, including a sluggish stock market and weakening currency.
Central to the surge in gold prices has been robust purchases by central banks worldwide, aiming to diversify reserve portfolios amidst geopolitical uncertainties, domestic inflation concerns, and the depreciation of the U.S. dollar, according to Cavatoni from the World Gold Council.
Cavatoni emphasized, “Really strong case for them to continue to buy … but let’s see if they continue to be as large and for as long.”
Data from the World Gold Council underscores China’s pivotal role, both in terms of consumer demand and central bank acquisitions of gold.
