Gold, which ended trading last Thursday at an all-time high, continues to rise in price on Monday on expectations that the Federal Reserve will soon begin cutting interest rates, MarketWatch writes.
On Friday, stock exchanges in the U.S. and many European countries were closed due to Easter.
Quotes of June contracts for the precious metal were $2238.4 per ounce at the close of trading on New York’s Comex exchange on Thursday. On Monday, it rose 1.7% to $2276.9.
Gold added 8.9% in March and was up 8% for the entire first quarter.
The “unprecedented rally” was triggered by softer-than-expected U.S. inflation data, which reinforced expectations that the Fed could start lowering rates as early as June, IG Senior Market Analyst Sergio Avila said.
The U.S. consumer price index (PCE index) in February rose by 0.3% in February compared to the previous month, the Commerce Department said on Friday. The rise was weaker than analysts’ expectations, who had forecast inflation to remain at January’s 0.4% rate.
Growth in the PCE Core index, which excludes the cost of food and energy, slowed to 0.3% month-on-month last month from 0.5% in January. The dynamics matched the consensus forecast.
Markets estimate the probability of a Fed prime rate cut in June at about 70%, Avila said. And it is expected to be cut by 75 basis points in total over 2024 from its current range of 5.25-5.5% per annum.
“Lower interest rates create a favorable environment for gold, increasing its attractiveness as an investment asset,” the expert added.
“Gold investors are currently acting with the belief that the Fed will choose to cut interest rates regardless of whether inflation reaches its target level or not,” said Stephen Innes, managing partner of SPI Asset Management. Demand is also being driven by the fact that central banks in developing countries are increasing their holdings of the precious metal, he said.
