As Sentiment About Impending Rate Cuts Strengthens, Gold Rises to 3-Month Highs

At the start of this week, the price of gold reached a three-month peak driven by increased bets for an interest rate cut by the Fed come June. Spot gold hit $2,113.3 an ounce, representing a 1.4% increase. This is its highest price since the start of December 2023, when its price reached $2,135.40 an ounce. U.S. gold futures hit $2,126.30 per ounce, a 1.5% increase.

This improvement in the precious metal’s price comes after its price recently surged about $50, driven by weak price pressures as well as construction and manufacturing spending. Disappointing economic data also facilitated the surge in gold’s price, with the ISM manufacturing purchasing managers’ index underperforming against market expectations. A contraction was observed between January and February, with new orders reducing to 49.2 from 52.5.

Correspondingly, the Michigan Consumer Sentiment index failed to reach market predictions and also fell short of its prior figure, which marked another significant miss.

Blue Line Futures chief market strategist Phillip Streible stated that the price of the precious metal could easily surpass its record highs. It is expected that Fed chair Jerome H. Powell may be dovish in his next address, which may positively influence gold’s performance.

The CME Fed Watch Tool shows that markets are betting on 66% chance of the Federal Reserve dropping interest rates by June. Kitco Metals senior analyst Jim Wyckoff added that gold was going to continue trending higher, especially if inflation numbers remained tame.

Gold is negatively affected when rates of interest in America applied to keep inflation in check increase returns on competing assets, such as bonds, and bolster the dollar, which makes the precious metal more expensive to purchase using foreign currencies.

Ole Hansen, head of commodity strategy at Saxo Bank, stated that heightened geopolitical tensions globally have decreased the short-selling appetite. This has, in turn, strengthened buy-on-dips credentials for gold.

Earlier this week, gold’s price benchmark reached a new high of $2,098.05 per troy ounce in London. The London Bullion Market Association revealed that its previous all-time high, set on Dec. 28, 2023, stood at $2,078.40. During the same period, the price of spot silver rose by 2.8% to reach $23.79 while palladium reached $960.50, .5% from its last figure. On the other hand, platinum hit $897.10 an ounce, a 1.1% increase.

The Commodity channel index is now showing a 250+ reading, with experts noting that when the reading normalizes, gold may surpass the high recorded at the end of 2023.

The surging price of gold is helping extraction companies such as Royal Gold Inc. (NASDAQ: RGLD) to attract more investor interest as people look to tap the upward market movement of the precious metal.

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