Rate cuts are coming: Gold prices hit a new record high
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- Gold prices surged to a record high to $2,265.73 per ounce on Monday.
- The Fed's preferred gauge of underlying inflation came in as expected on Friday, affirming rate-cut expectations for 2024.
- The yellow metal is generally seen as an inflation hedge, and it trades inversely to consumer prices.
The price of gold rallied to another record high on Monday, following fresh inflation data from Friday that boosted rate-cut hopes.
The yellow metal climbed as much as 1.6% to an all-time high of $2,265.73 per ounce.
The year-over-year PCE price index rose 2.5% in February, in line with economist expectations. Core PCE, which excludes food and energy prices, rose 2.8% for the month, also in line with estimates. The results have fueled further anticipation of the Central Bank's first rate cut in June.
Typically, a lower rate environment makes holding gold more alluring compared with other assets such as bonds, which yield lower returns when interest rates drop.
Federal Reserve Chair Jerome Powell also applauded the latest US inflation data, saying it's "along the lines of what we would like to see," during his speech on Friday, which also echoed his previous reiteration of a rate cut for this year in last month's policy meeting.
The surging bullion price was also pushed up by its robust overseas demand, as global central banks are shifting away from dollar reserves due to concerns over geopolitical risks.
On the other hand, China's struggling stock and real estate market has forced many investors to pivot to the "safe haven." In February, the People's Bank of China acquired around 390,000 troy ounces of the precious metal. Overall, China's central bank now holds approximately 72.58 million troy ounces of gold, equivalent to about 2,257 tons.