Gold Prices Reach New High Amidst Fed Rate Cut Speculation

Gold prices surged to a new all-time high of 2,353 USD per ounce during early trading on Monday, continuing a rapid ascent witnessed over the past two weeks. This surge comes as investors grapple with the aftermath of a robust U.S. jobs report released on Friday, which has prompted reconsideration of market expectations regarding the Federal Reserve's interest rate policy. The report revealed that the U.S. economy added 303,000 jobs in March, the fastest pace in 10 months, while the unemployment rate dropped to 3.8% from 3.9% in February.

Market sentiment had previously leaned towards an anticipation of the Federal Reserve's first interest rate cut in June, with odds reaching over 60%. However, the strong jobs report has cast doubt on this outlook, leading to a revision of expectations. Investors are now pricing in a reduced likelihood of a rate cut in June and projecting a total rate cut of 62 basis points by the end of 2024, down from earlier expectations of three 25-basis-point cuts in the latter half of the year.

The upcoming release of March U.S. inflation data on Wednesday is eagerly awaited, as it is expected to provide further insight into market expectations regarding the Fed's future interest rate adjustments. Generally, higher interest rates are not conducive to gold prices, as gold does not offer interest payments.

Following the record high, gold prices experienced some stabilization around the 2,330 USD to 2,340 USD range. Since the beginning of the year, gold has surged by more than 18%, driven partly by optimism surrounding the Fed's potential rate cut. Additionally, central bank gold purchases, particularly by the People's Bank of China, have contributed to the rally. China's central bank increased its gold reserves for the 17th consecutive month in March, albeit at a slower pace compared to previous months.

Central banks globally, led by China and India, continued to bolster their gold reserves in February, marking the ninth consecutive month of growth. However, net purchase volumes declined by 58% from the previous month due to increased sales. The status of gold as a "safe haven investment" has also been reinforced by ongoing geopolitical tensions, notably in the Middle East, where conflict between Israel and Hamas in Gaza has raised concerns about regional stability and potential escalation.

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