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Gold hit a record $2,454.20 an ounce on Monday after markets priced in rate cuts by the Fed.
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The consensus estimate on Wall Street is two 25 basis point cuts this year.
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The metal leads a broader commodities rally; copper and silver have also reached new highs.
Gold set another record on Monday as Wall Street prepares for monetary policy easing this year.
The yellow metal hit an intraday record high of $2,454.20 per ounce. This upward momentum comes as investors become increasingly open to the possibility of rate cuts this year. Because gold is a non-interest-bearing asset, it tends to perform better when interest rates fall.
Sentiment on the rate cuts changed after April’s cooler-than-expected Consumer Price Index report, which marked an upward turning point in gold prices and put March’s worryingly high inflation numbers in mind.
Now the futures markets expect two more cuts of 25 basis points this year, starting in September.
In another sign of optimism about rate cuts, risk appetite among investors increased significantly this month. A survey by S&P Global showed that rates rose to 28% in May – the highest since late 2021 – up from 5% in April.
There are other geopolitical reasons to invest in gold that go beyond muted expectations of interest rate cuts.
“The recent gold price gains are largely driven by three factors: rising geopolitical tensions – including the unexpected death of the Iranian president – the weakening of the dollar and central bank purchases,” said Grzegorz Dróżdż, market analyst at Conotoxia. . If negative surprises are avoided this year, he expects gold may rise above $2,500 in 2024.
Since gold is a safe haven, international confrontations have led to more investors purchasing the precious metal. Meanwhile, US sanctions on Russian reserves have prompted central banks to snap up the metal at a record pace.
The asset is also benefiting from a broader metals rally, with commodities such as copper and silver also breaking records. Spot silver climbed past an 11-year high on Monday.
“Silver has made incredible gains over the past two weeks and looks overbought at current levels. That would suggest some profit-taking could be happening now,” said David Morrison, senior market analyst at Trade Nation. “But traders would have to be very brave or reckless to short a market that is moving this way.”
Correction: May 20, 2024 – An earlier version of this story misspelled the Trade Nation analyst’s name. He’s David Morrison, not David Miarrions.
Read the original article on Business Insider
