Gold hit a fresh record-high of $2,141 on Fed rate cut bets

Gold shines again, as it hit a fresh record-high of $2,141/oz on Tuesday morning on growing bets that the Federal Reserve will start cutting interest rates this year (June), together with the softer dollar and bond yields, and on safe-haven demand due to the geopolitical risks.

Gold, Daily chart

The precious metal has gained almost $150/oz or 9% since mid-February (it bottomed at $1,980/oz) on increasing bets on the rate cut expectations by the Fed, and the Mideast crisis. (Source: www.cnbc.com) 

While market participants are trying to find the timing of the first Fed interest rate cut, gold traders are speculating that the world’s largest central bank might begin cutting rates as soon as June, rotating funds out of dollar-led assets (U.S. dollar and Treasury bills) and into bullion (gold and silver).

Two potential turns that could delay a further rally in the price of Gold would be a hawkish Fed Chair Powell’s speech after market close on Thursday, and if Friday's NFP jobs report comes in hotter than expected, making a case for Fed officials to push back expected rate cuts.

Gold and silver are pressured when high-interest rates to tame inflation raise returns on competing assets such as bonds and boost the dollar, making the precious metals more expensive for buyers with foreign currencies.

The yellow metal has also been receiving safety bets (gaining over $300/oz) since the start of the Hamas-Israel war (early October 2023), and on the Red Sea crisis, as it is considered a haven asset during times of geopolitical tensions, helping drive up demand for gold over the past couple of months.

Hence, many central banks from emerging markets (China, Poland, Singapore, India, Czech Rep., and others) have been buying up gold at historic levels, due to gold’s performance during times of crisis and its role as a long-term store of value. (Source: www.gold.org)