Gold surged to yet another record high, breaking the $2,350 per ounce price level on Monday.
The precious metal rally has been fueled by a combination of factors, including lingering inflation concerns and uncertainty surrounding central banks’ monetary policies.
The latest surge in gold prices comes as investors eagerly await the release of crucial US inflation data later in the week.
This data is expected to shed light on the trajectory of inflation in the world’s largest economy, which could have significant implications for monetary policy decisions.
Bullion rose by as much as 1% in early trading as market participants assessed the likelihood of policymakers pivoting towards lower borrowing costs.
The Federal Reserve has signaled its intention to raise interest rates this year to combat inflationary pressures.
However, the central bank remains cautious, stating that it requires further evidence of easing inflation before implementing rate hikes.
The unprecedented rally in gold prices, which began in mid-February, has left many observers puzzled, as there appears to be no clear trigger for the surge.
Despite unwinding bets for steep rate cuts during this period, gold has soared by more than 18%, reaching successive all-time highs.
Analysts attribute part of gold’s recent gains to optimism surrounding potential rate cuts by the Federal Reserve.
Also, central bank demand, particularly from the People’s Bank of China, has provided further support to gold prices, with March marking the 17th consecutive month of additions to China’s gold reserves.
Geopolitical tensions in the Middle East have also contributed to increased haven demand for gold.
Recent developments, such as Israel’s decision to withdraw some troops from southern Gaza and Iran’s preparation for a response to a suspected attack on its consulate in Syria, have added to the prevailing uncertainty in the region.
In light of these factors, UBS Group AG has revised its year-end gold outlook, raising it by 11% to $2,500 per ounce.
Analysts at UBS anticipate a revival in demand for gold-backed exchange-traded funds (ETFs) as the Federal Reserve considers rate cuts around mid-year.
At the time of reporting, spot gold was trading at $2,336.28 per ounce, up 0.3% from the previous session’s close.
Despite some retracement from its intraday high of $2,353.95, gold remains firmly above the $2,350 threshold.
The Bloomberg Dollar Spot Index, a measure of the dollar’s strength against a basket of major currencies, edged 0.1% higher. Concurrently, silver, platinum, and palladium prices also experienced gains.
As market participants brace for the release of key economic indicators and monitor geopolitical developments, the outlook for gold remains buoyant, with investors continuing to seek refuge in the precious metal amid ongoing uncertainty and inflationary pressures.
