Softer U.S. inflation report strengthens bullish sentiment
Gold prices surged to a historic high on Monday, bolstered by a softer-than-expected U.S. inflation report, which reinforced expectations of an impending interest rate cut by the Federal Reserve.
Spot gold saw a 1.39 percent increase to a record high of $2,260.89 as of 1:45 ET (5:45 GMT). Meanwhile, U.S. gold futures gained 1.97 percent to $2,282.55.
In the UAE, gold prices saw an almost AED100 increase, where one ounce reached AED8,297.87 up from AED8,198.78 yesterday. Twenty-four-carat gold saw a AED3.25 increase to AED273.75 per gram while 22-carat gold saw a AED3 increase to AED253.50 per gram.
Softer inflation data sparks gold rally
Gold prices surged driven by the release of the U.S. personal consumption expenditures (PCE) price index report, which showed a moderation in U.S. prices in February. The core reading of the PCE index reached its lowest level in nearly two years, adding momentum to gold’s rally as it signaled potential validation for the Fed to initiate rate cuts sooner.
Federal Reserve chair Jerome Powell’s remarks following the release of the inflation data further fueled expectations of a rate cut in June, further supporting gold prices. Powell indicated that the latest inflation figures aligned with the Fed’s objectives, suggesting that a reduction in interest rates was indeed on the table. Traders responded swiftly to Powell’s comments, with the CME Group’s FedWatch Tool indicating a 69 percent probability of a rate cut in June, up from 64 percent prior to the data release.
Read: UAE petrol, diesel prices for April 2024 announced
Gold’s rally
The surge in gold prices in March marked its largest monthly rise in over three years. That is due to the expectations of rate cuts, heightened safe-haven demand, and increased central bank buying. Despite a recent uptick in positioning among money managers, market analysts believe there is still room for further upside potential in gold prices, especially considering the current economic environment and historical trends.
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