Gold is within striking distance of a new record high as the market bets the first US interest-rate cut since early 2020 is near.
The precious metal briefly rose above $2 100/oz Monday, the highest price since the all-time record of $2 135.39/oz recorded in early December.
Non-yielding assets, like gold and silver, tend to perform well when interest rates drop. After two years of rising rates, more than three in five investors bet the Fed will cut rates in June following weaker-than-expected US data on Friday, swaps markets data show. That’s about 10 percentage points more than at this time last week. Lowering borrowing costs is seen as a way to help shore up the economy.
The surge in gold buying is mostly from hedge funds and money managers, who are now in a rush to reestablish bullish wagers on the metal, despite headwinds such as the strength in the US dollar, according to Ole Hansen, head of commodity strategy at Saxo Bank.
Investors “have been forced back into the market on the long side,” Hansen said. “The rebuilding of long positions may take a few days and if gold stays above $2 088 at today’s close, I would expect more buying then.”
Robust buying by investors is also reflected in gold exchange-traded funds, with holdings of SPDR Gold Shares (GLD) seeing their first daily inflow in nine trading sessions on Friday, Bloomberg data show. Gold ETFs were the main driver in the precious metal’s rally to a then-all-time high during the pandemic, but higher rates have largely driven away buyers since 2022.
Spot gold was up 0.8% to $ 2 100.47/oz as of 10:21 a.m. in New York. Silver and platinum gained while palladium fell.