Gold prices surged to yet another historic high on Monday flourished by mounting expectations of a U.S. interest rate cut and the metal’s allure as a safe-haven investment. Analysts anticipate that the U.S. Federal Reserve will likely slash rates either in May or June.
Spot gold soared by 1.32% to reach $2,265.53 per ounce, while U.S. gold futures surged by over 2% to $2,286.39 per ounce.
Joseph Cavatoni, a market strategist at the World Gold Council, expressed enthusiasm about the current state of the gold market, attributing the surge to growing confidence among market speculators regarding potential Fed rate cuts.
Although the Fed opted to maintain interest rates at its recent March meeting, its forecast still includes three interest rate cuts for the year. This decision was influenced by the February inflation gauge, which indicated a 2.8% year-on-year increase, potentially delaying any rate cuts.
Gold prices typically exhibit an inverse correlation with interest rates, making them more attractive as rates decline compared to fixed-income assets like bonds, which offer diminished returns in a low-rate environment.
Caesar Bryan, a portfolio manager at Gabelli Funds, noted that overseas demand, particularly from China, has also contributed to the rally. Chinese investors have turned to gold amid underperformance in the real estate sector and overall economic weakness.
Central banks worldwide have been actively purchasing gold to diversify their reserve portfolios due to geopolitical tensions, domestic inflation concerns, and the weakening U.S. dollar. Cavatoni emphasized China’s significant role in both consumer demand and central bank acquisitions of gold, according to data from the World Gold Council.
