Gold Prices Hit Three-Month Peak on Rate Cut Bets

Gold prices soared to a three-month high on Monday, fuelled by mounting expectations for a potential interest rate cut by the U.S. Federal Reserve in June. The price of spot gold climbed by 1.4% to $2,113.28 per ounce, marking its highest level since December 4. This surge comes on the heels of lackluster economic data and speculation of a weaker dollar.

U.S. gold futures also rallied, settling about 1.5% higher at $2,126.3 as investors eagerly bet on the possibility of a rate cut in mid-year. Market analysts anticipate that Federal Reserve Chair Jerome Powell’s upcoming speeches this week could provide a more dovish tone, further supporting gold’s upward trajectory.

Market indicators currently suggest a 66% probability of a Fed rate cut in June as per the CME Fed Watch Tool. Should inflation numbers remain subdued, gold prices are likely to sustain their upward trend, notes Jim Wyckoff, a senior analyst at Kitco Metals.

Gold typically falters in environments with elevated interest rates aimed at curbing inflation, as higher returns on alternative assets like bonds bolster the appeal of the dollar, thereby denting gold’s allure. However, the recent global uncertainties have tempered short-selling activities, reinforcing gold’s status as a preferred safe-haven investment.

In a significant development, London’s gold price benchmark reached an all-time high of $2,098.05 per troy ounce during Monday’s afternoon auction, surpassing the previous record set in December. Platinum and palladium also witnessed upward movement, with spot silver climbing by 2.8% to $23.79 per ounce.

Overall, the outlook remains bullish for gold as investor sentiment remains sensitive to macroeconomic developments and potential shifts in monetary policy. The market’s current focus centers on deciphering upcoming economic indicators and central bank communications to gauge the trajectory of precious metal prices.