Gold prices hit a record high on Monday, reaching as much as $2,265.73 an ounce, driven by a combination of factors including expectations of a Federal Reserve interest rate cut, geopolitical tensions, and strong demand from China.
The Federal Reserve’s preferred inflation gauge, the core personal consumption expenditures index, showed a cooling in February, adding to the case for a reduction in borrowing costs. This, combined with the ongoing tensions in the Middle East and Ukraine, has fueled a 14% increase in gold prices since mid-February.
Investors are now looking ahead to the US economic outlook and central bank policy, with monthly payrolls expected to increase for a fourth straight month. Swaps markets are pricing in a 61% chance of a Fed rate cut in June, which is seen as positive for gold as it does not pay interest.
Chinese demand for gold has also been a significant driver of the rally, with the nation’s central bank increasing its bullion reserves for the past 16 months. Younger Chinese consumers have also been buying gold, adding to the overall demand.
Despite the positive outlook for gold, some investors have been pulling back from bullion-backed ETFs, with worldwide holdings shrinking in the first quarter. However, leading banks like JPMorgan Chase and Goldman Sachs remain bullish on the metal, with price targets of $2,500 and $2,300 per ounce respectively.
Overall, the outlook for gold remains positive, with various factors contributing to its recent rally and potential for further price increases in the future.