Kelvin Hill April 1, 2024
Introduction
By Sherin Elizabeth Varghese (Reuters) – Gold prices rose to a record high on Monday, as a softer U.S. inflation reading cemented bets that the Federal Reserve would deliver its first interest rate cut of the year in June.
Record High Gold Prices
Spot gold was up 1.2% at $2,258.12 per ounce, as of 0529 GMT, after hitting an all-time high of $2,265.49 earlier in the session. U.S. gold futures gained 1.8% to $2,279.10.
Market Analyst Commentary
“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,” said IG market strategist Yeap Jun Rong, referring to the personal consumption expenditures (PCE) price index report. The core reading now at its lowest level in almost two years potentially offers some validation for the Fed to kick-start its rate-cutting process sooner rather than later, Jun Rong said.
U.S. Inflation Data and Interest Rate Cut
U.S. prices moderated in February, with the PCE price index rising 0.3%, data showed on Friday. The latest U.S. inflation data is “along the lines of what we would like to see,” Fed Chair Jerome Powell said, indicating that a June interest rate cut was on the table. Traders are currently pricing in a 69% probability that the Fed would begin cutting rates in June, up from 64% before the data came in on Friday, according to the CME Group’s FedWatch Tool.
Impact of Lower Interest Rates
Lower interest rates reduce the opportunity cost of holding bullion. Gold logged its biggest monthly rise in more than three years in March after a blistering rally fueled by rate-cut bets, strong safe-haven demand, and central bank buying.
Market Outlook and Precious Metals
“Positioning among money managers may have touched a two-year high lately, but are still not at extended levels such as in 2016 or 2020, which may suggest room for further catch-up buying,” Jun Rong said. Spot silver rose 0.9% to $25.19 per ounce, platinum was up 0.5% at $912.90, and palladium climbed 0.7% to $1,021.77.
FAQs
– Will gold prices continue to rise in the near future?
– How do lower interest rates affect the price of gold?
– What factors contribute to the demand for precious metals like silver, platinum, and palladium?
– Are central banks still actively buying gold?
– What impact does market speculation have on the price of gold?
