Gold prices surged to a historic high on Monday, bolstered by a softer-than-expected U.S. inflation report, which reinforced expectations of an impending interest rate cut by the Federal Reserve.
Spot gold saw a 1.39 percent increase to a record high of $2,260.89 as of 1:45 ET (5:45 GMT). Meanwhile, U.S. gold futures gained 1.97 percent to $2,282.55.
In Saudi Arabia, 24-carat gold and 22-carat gold remained stable at SAR277 and SAR257, respectively. Eighteen-carat gold also remained unchanged at SAR 210.30
Softer inflation data sparks gold rally
Gold prices surged driven by the release of the U.S. personal consumption expenditures (PCE) price index report, which showed a moderation in U.S. prices in February. The core reading of the PCE index reached its lowest level in nearly two years, adding momentum to gold’s rally as it signaled potential validation for the Fed to initiate rate cuts sooner.
Federal Reserve chair Jerome Powell’s remarks following the release of the inflation data further fueled expectations of a rate cut in June, further supporting gold prices. Powell indicated that the latest inflation figures aligned with the Fed’s objectives, suggesting that a reduction in interest rates was indeed on the table. Traders responded swiftly to Powell’s comments, with the CME Group’s FedWatch Tool indicating a 69 percent probability of a rate cut in June, up from 64 percent prior to the data release.
Read: Oil prices rise amid tight supply, upbeat Chinese economic data
Gold’s rally
The surge in gold prices in March marked its largest monthly rise in over three years. That is due to the expectations of rate cuts, heightened safe-haven demand, and increased central bank buying. Despite a recent uptick in positioning among money managers, market analysts believe there is still room for further upside potential in gold prices, especially considering the current economic environment and historical trends.
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