Gold reached a new record today as optimism grew regarding the Federal Reserve’s potential interest rate cuts in the new year. Despite Jerome Powell’s efforts to temper expectations, traders showed confidence in rate cuts. However, equity markets faced challenges in building on Wall Street’s positive lead, with focus shifting to upcoming US jobs figures at the end of the week.
Expectations for a monetary policy easing heightened after Powell stated on Friday that interest rates were “well into restrictive territory” following more than a year of hikes. Recent data indicating a softening labor market, an economic slowdown, and declining inflation towards the bank’s two percent target contributed to stock rallies and a weaker dollar.
Gold surged to $2,135 on Monday, boosted by safe-haven buying amid the Israel-Hamas conflict. The precious metal gained strength as data suggested a slowdown in inflation, fueling speculation about potential Fed rate cuts. Bets on rate drops impacted the dollar, making gold more affordable for international buyers.
Traders, as reported by Bloomberg, assigned a 60 percent chance of a rate cut in March, fully pricing one in May. Kyle Rodda of Capital.com noted, “Markets are piling in on the rate cut bets,” anticipating that gold could rise further at the earliest sign of a recession.
