Tuesday, May 21, 2024
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Gold flirts with new highs as market eyes June hike

Gold prices flirted with record highs on Monday as investors continued to flock to the safe-haven metal in anticipation of a potential US Federal Reserve interest rate cut scheduled for June.

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At 2:35 p.m. EDT, spot gold surged by 1.5% to reach $2,115.43 per ounce, a mere $20 shy of its previous record high of $2,135 set in December 2023. Similarly, US gold futures traded 1.4% higher at $2,124.70 per ounce.

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Ryan McKay, senior commodity strategist at TD Securities, expressed optimism about gold’s potential for further gains, particularly noting that some discretionary macro traders are underinvested in the metal relative to historical norms ahead of a Federal Reserve cutting cycle.

Phillip Streible, chief market strategist at Blue Line Futures in Chicago, echoed this sentiment, suggesting that gold could easily surpass its previous record highs.

The surge in gold prices coincides with growing consensus among investors that the Federal Reserve will implement its first interest rate cut since early 2020 in June. Market data from swaps markets indicate that nearly three in five investors anticipate a rate trim, spurred by a series of weaker-than-expected US economic reports.

In addition to economic factors, ongoing geopolitical tensions, including the upcoming US presidential election and conflicts in Ukraine and Gaza, are bolstering gold’s appeal as a long-term investment option.

Ole Hansen, Saxo Bank’s head of commodity strategy, attributed the heightened geopolitical tensions worldwide to a decrease in short-selling appetite, thereby strengthening gold’s position as a preferred asset for investors seeking to capitalize on market dips.

Investor interest in gold has translated into robust buying activity in gold exchange-traded funds, with Bloomberg data indicating that holdings of SPDR Gold Shares experienced their first daily inflow in nine trading sessions last Friday.

Earlier in the day, London’s gold price benchmark reached an all-time high of $2,098.05 per ounce during an afternoon auction, surpassing the previous record set on December 28.

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