Gold steadied after surging to a record high in the previous session, boosted by expectations for US rate cuts, geopolitical tensions and the risk of a pullback for equity markets.
Bullion rose to a peak of $2 141.79 an ounce on Tuesday, surpassing the previous high set in early December. The precious metal has climbed almost 5% over the last five sessions.
Gold’s ascent has taken some in the market by surprise, particularly since there hasn’t been any major change in expectations for when the Federal Reserve will lower borrowing costs. Swaps markets show a 62% chance of a cut in June, compared with 58% at the end of February. Lower rates are typically positive for bullion, which doesn’t offer any interest.
“The velocity and the speed was very sudden, very fast,” said James Steel, an analyst at HSBC Holdings. “It didn’t seem to have a smoking gun.”
Beyond rates, other factors have contributed to gold’s strength. Macro funds, which haven’t been active in the market until recently, were a new force of buying. Bullion’s role as a haven asset is also being aided by elevated Middle East tensions and disruptions to global shipping, China’s persistent economic woes and the US presidential election at the end of the year.
The risk of a US stock market correction — flagged by weak manufacturing data on Friday — may have persuaded some investors to move out of equities and into gold, said Ole Hansen, a commodity strategist at Saxo Bank A/S.
Spot gold declined 0.1% to $2 127.03 an ounce as of 9 a.m. in Singapore. The Bloomberg Dollar Spot Index rose 0.1%. Silver edged higher, while platinum and palladium were flat.