Gold Prices Reach Record High Amid Soft US Data, Reinforcing Predictions of June Rate Cut
On April 1, gold prices surged to unprecedented levels as a tepid U.S. inflation report solidified expectations for the Federal Reserve’s inaugural interest rate reduction of the year in June.
At 0328 GMT, spot gold escalated by 1.2% to $2,258.71 per ounce, soaring to an all-time peak of $2,259.49 earlier during the trading session. Meanwhile, U.S. gold futures surged by 1.8% to $2,279.10.
Market strategist Yeap Jun Rong from IG remarked, “The absence of any upside surprises in the core PCE price index release may have provided further go-ahead for gold prices to push into new record territory,” referring to the personal consumption expenditures (PCE) price index report.
The core reading, now at its lowest point in almost two years, potentially offers affirmation for the Fed to initiate its rate-cutting agenda sooner rather than later, Jun Rong noted.
In February, U.S. prices saw a moderation, with the PCE price index increasing by 0.3%, according to Friday’s data release.
Federal Reserve Chair Jerome Powell commented on the latest U.S. inflation data, stating it aligns “along the lines of what we would like to see,” indicating a possible interest rate reduction in June.
According to the CME Group’s FedWatch Tool, traders are currently assigning a 69% likelihood of the Fed commencing rate cuts in June, up from 64% before the recent data emerged on Friday.
Lower interest rates diminish the opportunity cost of holding bullion.
Following a robust rally propelled by rate-cut predictions, robust safe-haven demand, and central bank acquisitions, gold notched its most substantial monthly gain in over three years in March.
Jun Rong highlighted, “Positioning among money managers may have reached a two-year pinnacle recently, but has yet to attain levels seen in 2016 or 2020, suggesting potential room for additional catch-up buying.”
In tandem with gold, spot silver surged by 0.7% to $25.15 per ounce, platinum ascended by 0.6% to $913.65, and palladium climbed by 0.8% to $1,022.70.
