Gold surges to record $2,450/oz on Fed rate-cut speculation & geopolitical risks

Gold has hit record highs, fuelled by expectations of Federal Reserve rate cuts and escalating geopolitical tensions. Surging 20% this year, gold’s rally gained momentum as investors bet on Fed policy shifts and sought haven assets amidst geopolitical uncertainties in the Middle East and Ukraine. This surge, coupled with robust Asian demand and central bank purchases, underscores gold’s enduring appeal as a safe-haven investment in times of economic and geopolitical uncertainty.

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By Sybilla Gross

Gold surged to an all-time high, boosted by increasing optimism the Federal Reserve will start easing monetary policy this year along with rising geopolitical tensions in the Middle East.

Bullion jumped as much as 1.4% to hit $2,450.07 an ounce in Asia on Monday, surpassing a previous intraday record reached in April. Traders have been boosting bets in recent sessions that the Federal Reserve could reduce borrowing costs as early as September, a scenario that would bolster gold as it doesn’t pay interest.

Last week, the US dollar fell and Treasuries rallied after data released on Wednesday showed inflation in April eased more than expected. That offered support for the precious metal, which is priced in the greenback. 

The metal’s haven status was in the spotlight on Monday after a helicopter carrying Iranian President Ebrahim Raisi crashed in dense fog on Sunday. The news added to a sense of rising geopolitical risks across the region, after a China-bound oil tanker was hit by a Houthi missile in the Red Sea on Saturday.

“Gold’s rally is news-driven with uncertainty about what happened in Iran,” said Nicholas Frappell, global head of institutional markets at ABC Refinery in Sydney. “There is bound to an element of jumping to conclusions on the basis of very little information,” he said, adding “investors are likely reluctant to fade positions given lower levels of liquidity in Asia.”

Read more:  Nividia-led tech titans rival gold as shield against inflation

Hedge funds trading Comex futures boosted bullish bets on gold to a three-week high in the week ending May 14, according to the latest data from the Commodity Futures Trading Commission.

The gains suggest that bullion has broken out of what’s been a fairly narrow trading range in recent weeks amid a lack of clarity over the US rate path. Prices are now up almost 20% this year, after a blistering rally that saw it hit successive records throughout April.

Gold’s strength has been linked to central-bank purchases, robust demand from Asian markets — especially China — and elevated geopolitical tensions in Ukraine and Middle East.

Spot gold rose 1.4% to $2,449.27 an ounce as of 1:59 p.m. in Singapore. The Bloomberg Dollar Spot Index was flat, following a 0.7% decline last week to its weakest in more than a month. Silver, palladium and platinum all climbed.

Silver also climbed to the highest since December 2012, after a strong rally on Friday was helped by spillover sentiment in wider physical metals markets, where tightening supply has spurred investor demand for materials like copper. Unlike gold, the white metal is also considered an industrial commodity given its usage in things such as solar panels.

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