Gold prices soared to fresh all-time highs, boosted by rising expectations of the U.S. Federal Reserve cutting interest rates and escalating geopolitical tensions in the Middle East that stoked safe-haven demand for the precious metal.
Bullion Tops $2,450 as Traders Price in 2024 Fed Rate Cuts
Gold futures surged as much as 1.4% to hit a historic intraday peak of $2,450.07 an ounce in Asian trading on Sunday. The previous record high was set in April. Traders have been increasing bets that the Fed could start reducing borrowing costs as early as September 2024 to support the economy.
Cooling U.S. Inflation Fuels Rate Cut Optimism
Last week’s cooler-than-expected U.S. inflation data for April bolstered hopes of an imminent policy pivot by the Fed. This saw the U.S. dollar weaken and Treasury yields decline, providing a supportive backdrop for dollar-priced gold.
Geopolitical Risks Add to Gold’s Haven Appeal Gold’s safe-haven status was amplified on Sunday after a helicopter carrying Iranian President Ebrahim Raisi crashed, stoking fears over rising instability in the region. This came on the heels of a China-bound oil tanker being struck by a Houthi missile in the Red Sea.
“Gold’s rally is news-driven with uncertainty about what happened in Iran,” said Nicholas Frappell, head of markets at ABC Refinery. “Investors are likely reluctant to fade positions given lower liquidity in Asia.”
Silver Extends Gains on Supply Tightness
Spot silver prices jumped 1.3% to $31.88 after hitting an 11-year high, benefitting from positive sentiment across industrial metals facing supply constraints. Hedge funds boosted bullish bets on gold futures to a three-week peak in the week through May 14, CFTC data showed.
With the Fed’s policy outlook seen as a crucial driver and geopolitics adding an extra risk premium, gold’s record-shattering rally highlights the precious metal’s coveted safe-haven status during times of economic and global uncertainty.
