The price of gold continued to rise to a new record high on Monday, boosted by signals that the US Federal Reserve is getting closer to cutting interest rates, as well as geopolitical tensions and robust demand for the yellow metal from China, reports Bloomberg.
The spot price of gold rose to an all-time high of $2,265.73 an ounce on Monday, up 1.6% compared to the value recorded at the close of Thursday’s session, after already setting a series of records in recent sessions, Agerpres reports .
Statistics released on Friday as financial markets were closed showed that core US inflation, the Fed’s favorite gauge of inflationary pressures, fell in February while consumption rose. That brings fresh arguments for a reduction in borrowing costs, even as the US central bank has adopted a cautious tone.
More positive statistical data has led to a roughly 14% increase in gold since mid-February. The prospect of monetary policy easing by major central banks, as well as heightened tensions in the Middle East and Ukraine, supported this increase. There have also been significant gold purchases by central banks, particularly in China, where consumers have been hoarding gold amid problems in Asia’s largest economy.
After the release of inflation numbers in February, Federal Reserve Chairman Jerome Powell said the data was “in line with expectations,” adding that the Fed was in no rush to cut interest rates.
However, financial markets estimate there is a 61% chance the Fed will cut rates in June, up from just a 57% chance on Thursday. Normally, lower interest rates are a positive for gold, which does not bring interest to investors.
“Inflation data, and Powell’s comments in particular, have provided new impetus for gold, and the market is becoming increasingly convinced that the Fed will start cutting interest rates in June,” said Warren Patterson, analyst at ING Groep NW
Gold’s positive outlook was supported by a number of major banks. Among them, JPMorgan Chase & Co. estimated last month that the price of an ounce of gold could reach $2,500 this year. Analysts at Goldman Sachs Group also believe there is potential for gold to reach $2,300 an ounce amid low interest rates.
