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Gold is rising amid a ‘perfect storm’ with expectations that the Fed will cut rates

Gold hit new highs on Tuesday as investors continue to bet that major central banks will cut interest rates this year.

On Tuesday morning, gold futures (GC=F) hit a high of $2,150.50 after April contracts settled at a record $2,126.30 per ounce in the previous session.

Tuesday’s intraday spot gold hit a record $2,141.79 an ounce before paring gains.

The precious metal is considered a safe haven in times of geopolitical tensions and when interest rates fall. While the timing of the Fed’s first rate cut is uncertain, investors expect the Federal Reserve to start cutting rates in June, while Europe is expected to do the same this year.

“There is a perfect storm brewing in the gold market,” Phillip Streible, chief market strategist at Blue Line Futures, told Yahoo Finance on Tuesday, noting that prices have risen by about $150 since mid-February.

The possibility of more turmoil at regional banks after New York Community Bankcorp’s woes has also helped push prices higher in recent sessions, amid expectations that Fed officials will step in to save the sector, Streible says .

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“If there’s a bank failure, some regional banking risk, you’re going to see those issues highlighted. [rate] “The Fed has lowered expectations, and ultimately they will make those cuts a little bit sooner,” he said.

One possible key that could slow a further rally would be if Friday’s jobs report comes in better than expected, which would provide a case for Fed officials to reverse expected rate cuts.

Bullion’s price gains are unrelated to the recent outflows in gold-related ETFs. Strategists believe investors have been turning money into bitcoin ETFs as the token has soared to new highs.

“We are seeing a rotation from gold to bitcoin, which is attracting about $1 billion per week in ETF inflows,” Streible said.

Central banks have been buying gold at historic levels, increasing demand in recent years.

Adjusted for inflation, gold hit a record high in 1980 when it reached $850 per ounce, which equates to almost $3,200 in today’s dollars.

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Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on Twitter at @ines_ferre.

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