Gold prices remained close to a two-month peak on Monday, following the previous week’s lackluster U.S. economic data, which reinforced expectations for the Federal Reserve’s initial interest rate reduction of the year in June.
“Spot gold was steady at $2,084.13 per ounce, as of 1047 GMT. U.S. gold futures fell 0.2% to $2,090.90,” noted the report.
The article highlighted that gold prices hovered around $2,088.19 an ounce, a level attained on Friday, marking its highest point since December 28. Notably, the bullion had reached a record high of $2,135.40 in early December.
UBS analyst Giovanni Staunovo attributed the recent surge in gold prices to “weaker-than-expected U.S. economic data last week” which led to a decline in U.S. real interest rates, fueling the latest rally.
The report emphasized that gold prices soared by approximately $50 over the previous week, driven by disappointing U.S. manufacturing and construction spending figures, along with a decline in price pressures, as indicated by the Federal Reserve’s preferred inflation gauge.
The appeal of non-yielding bullion was further enhanced by lower interest rates. Staunovo noted, “The price rally likely was driven by short-term oriented investors buying gold in anticipation that a soft landing of the U.S. economy allows the Fed to cut rates soon and offsetting weak ETF gold demand.”
The article also highlighted a decline in holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, which reported a decrease of more than 6% so far this year.
Markets displayed increased expectations for a June rate cut, with a 74% chance being priced in, compared to around 65% the previous week, according to LSEG’s interest rate probability app.
The next significant U.S. economic release that could impact expectations for a rate cut will be February’s employment report, scheduled for Friday.
