Expectations of FED Rate Cut Sends Global Gold Prices Soaring

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The world gold price has reached an all-time high as market expectations grow for a rate cut by the US Federal Reserve (FED). The surge in prices of the precious metal is mainly driven by investors seeking safe-haven assets amid uncertainties in the global economy.

Reaching New Heights

Gold for April delivery rose by $30.60, equivalent to 1.46%, reaching $2,126.30 per ounce. This is the highest level since the creation of gold futures in 1974. It also marks the second consecutive session where gold achieved a record-breaking price. Last Friday, gold for April delivery reached $2,095.70 per ounce.

Gold Mining ETFs on the Rise

The VanEck Gold Miners ETF increased by 4.3% and experienced a three-day consecutive gain. This is the first time since January 12 that the ETF has traded above its 50-day moving average of $28.295. Investors are showing confidence in gold mining ETFs in light of the expected rate cut by the FED.

Gold’s Historical Performance

Peter Boockvar, the Chief Investment Officer at Bleakley Financial Group, noted that when adjusted for inflation, gold reached its all-time high of around $3,200 per ounce in 1980. As of now, the price of gold has increased by 2.63% since the beginning of the year.

Factors Driving Gold’s Rise

Despite high interest rates and a strong US dollar, gold continues to perform well. One significant reason is the significant purchase of gold by central banks worldwide. Additionally, market expectations of the FED initiating rate cuts this year due to declining inflation have further boosted gold prices. As interest rates decrease, other assets such as bonds become less attractive, leading investors to seek safe-haven assets like gold.

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Potential Headwinds

Bart Melek, the Head of Global Commodity Strategy at TD Securities, explains that gold’s recent price increase is also a result of weaker-than-expected economic data, particularly in the manufacturing sector. He further suggests that if inflation gradually decreases over time as the economy weakens, it would provide conditions for the FED to seriously consider rate cuts. Currently, traders are betting on a rate cut by the FED in June, according to the CME Fed Watch Tool. However, gold may face headwinds if economic data, especially employment figures, become stronger than anticipated.

By keeping a close eye on economic indicators and the FED’s monetary policies, investors can make informed decisions regarding their gold investments.

According to CNBC