Gold prices extended their rally and scaled to another record high on Monday, propelled by U.S. interest rate cut expectations and the metal\u2019s appeal as a safe haven asset.<\/p>\n
Spot gold added 0.6% to trade at $2,245.79 per ounce. U.S. gold futures rose more than 1% to trade at $2,266.39 per ounce.<\/p>\n
\u201cI think it\u2019s a really exciting moment in gold,\u201d said Joseph Cavatoni, market strategist at the World Gold Council told CNBC on Monday. \u201cWhat\u2019s really driving it is, I think, many market speculators really getting that confidence and comfort [in] the Fed cuts,\u201d he said.<\/p>\n
Market watchers are expecting the U.S. Federal Reserve to cut rates in May or June.<\/p>\n
The key Fed inflation gauge for February climbed 2.8% year-on-year, according to data released last Friday \u2014 likely to keep the U.S. central bank on hold before it can start considering interest rate cuts.<\/p>\n
The Fed stood pat on interest rates at the conclusion of its recent March meeting, but stuck with its forecast for three interest rate cuts this year.<\/p>\n
Gold prices tend to share an inverse relationship with interest rates. As interest rates fall, gold becomes more appealing compared to fixed-income assets such as bonds, which would yield weaker returns in a low-interest-rate environment. <\/p>\n
Bullion prices were also driven higher by overseas demand, according to Caesar Bryan, portfolio manager at investment management company Gabelli Funds.<\/p>\n
\u201cIn China, private investors have been attracted to gold because the real estate sector has done poorly,\u201d Bryan said, adding that China\u2019s general economy has remained weak and its stock market and currency have not been performing well.<\/p>\n
The gold rally so far has been fueled by robust purchases from the world\u2019s central banks in a bid to diversify reserve portfolios due to geopolitical risks, domestic inflation and U.S. dollar\u2019s weakness, said Cavatoni from the World Gold Council.<\/p>\n
\u201cReally strong case for them to continue to buy \u2026 [but] let\u2019s see if they continue to be as large and for as long,\u201d he added.<\/p>\n
China is the leading driver for both consumer demand and central bank gold purchases, according to data from the WGC.<\/p>\n<\/p>\n
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