US Data Boosts Optimism of Fed Cuts, Buoys Gold Price to New Record

At the start of last week, the price of gold extended its rally, boosted by its appeal as a safe haven asset and expectations of an interest rate cut. U.S. gold futures increased by more than 1% to reach $2,266.39 an ounce while spot gold hit $2,245.79 an ounce, representing a 0.6% increase.

In an interview, the head of commodities research at Citi’s North America desk, Aakash Doshi, suggested that the price of gold could hit $2,300 an ounce by the second half of this year, particularly against the expectations that the Fed could reduce interest rates during the same period. In a separate interview, a market strategist at the World Gold Council, Joseph Cavatoni, stated that this was an exciting moment for gold as market speculators continue driving its performance. Market watchers expect the Fed to reduce interest rates next month or in June.

Data released last week shows that the Federal Reserve’s gauge for February rose 2.8% year on year. Some speculate that this was to keep the central bank on hold before it could begin considering dropping interest rates. At its meeting last month, the Federal Reserve hunkered down on interest rates, with Powell noting that the Fed would be sticking with its prediction for three interest rate cuts.

The price of gold shares an inverse relationship with rates of interest. As the rate of interest drops, the price of gold increases as the metal’s appeal increases. This is in comparison to fixed-income assets such as bonds, which bring in lower returns when rates of interest are low.

A portfolio manager at Gabelli Funds, Caesar Bryan, revealed that the price of bullion was also driven by higher demand overseas. Bryan explained that private investors in China were attracted to gold because the nation’s real estate sector was performing dismally. He added that the economy of the east Asian country was weak while its currency and stock market were performing poorly.

Thus far, gold’s rally has been driven by huge purchases from central banks in different parts of the world to diversify reserve portfolios due to a weakening U.S. dollar, domestic inflation and geopolitical risks. The latest data from the World Gold Council shows that China is the leading driver for central bank and consumer-demand gold purchases. The People’s Bank of China was the biggest buyer of gold last year, with the World Gold Council noting that the real estate sector’s performance drove more investors toward the precious metal.

It would be interesting to hear from companies such as GEMXX Corp. (OTC: GEMZ) that are in the business of extracting gold and making jewelry about how this surge in the price of gold is impacting their business models.

NOTE TO INVESTORS: The latest news and updates relating to GEMXX Corp. (OTC: GEMZ) are available in the company’s newsroom at https://ibn.fm/GEMZ

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