Gold prices soared to new heights on Monday as investors flocked to the safe-haven asset amidst growing expectations of interest rate cuts in the United States.
Spot gold surged by 1.32% to trade at $2,265.53 per ounce while U.S. gold futures rose over 2% to $2,286.39 per ounce.
Analysts attribute the rally in gold prices to mounting anticipation of rate cuts by the U.S. Federal Reserve.
Market strategist Joseph Cavatoni from the World Gold Council explained the significance of this moment for gold and highlighted the confidence among market speculators in potential Fed cuts.
Speculation is rife that the Fed might implement rate cuts in May or June, with the key inflation gauge climbing by 2.8% year-on-year in February.
The inverse relationship between gold and interest rates has become increasingly pronounced, with gold becoming more attractive to investors as interest rates decline.
In a low-interest-rate environment, fixed-income assets like bonds offer weaker returns, further enhancing gold’s allure as a store of value.
Overseas demand has also contributed to the surge in gold prices. Caesar Bryan, a portfolio manager at Gabelli Funds, noted increased interest from private investors in China, drawn to gold amid underperformance in the real estate sector and economic instability.
Central banks worldwide continue to bolster their gold reserves as a hedge against geopolitical risks and domestic inflation.
China, in particular, has emerged as a key player in both consumer demand and central bank purchases of gold, according to data from the World Gold Council.
The unprecedented rally in gold prices underscores the widespread economic uncertainty prevailing globally, prompting investors to seek refuge in this timeless safe-haven asset.