Gold continued to climb new highs on Monday as traders digested fresh data showing a moderation in US business activity while awaiting key economic readings due later this week for clues on the Federal Reserve’s next move.
Spot gold maintained above the key $2,600/oz. level set last week, up 0.2% to $2,627.34/oz. by 12:15 p.m. ET. Earlier, it had hit a new record high of $2,635.05/oz. US gold futures rose 0.3% to $2,653.70/oz. in New York.
Bullion has advanced since the Federal Reserve lowered its benchmark interest rate by half a percentage point last week, building on what was already a record-setting year for the precious metal. Rate cuts are often seen as positive for the non-yielding gold.
Further rate cuts are to be expected, based off the latest comments from Fed officials.
Federal Reserve Bank of Minneapolis President Neel Kashkari said on Monday that he expects to lower interest rates by smaller, quarter-point moves at each of the central bank’s two remaining meetings this year.
“After 50 basis points, we’re still in a net tight position so I was comfortable taking a larger first step,” Kashkari told CNBC. “As we go forward, I expect, on balance, we will probably take smaller steps unless the data changes materially.”
Federal Reserve Bank of Chicago President Austan Goolsbee, meanwhile, said during a Q&A event that interest rates need to be lowered “significantly” to protect the US labor market and support the US economy.
After scrutinizing the comments from Monday’s Fed speakers, traders will turn their attention to US personal consumption data and jobless claims later in the week. Those could inform the central bank’s thinking on future rate cuts.
“The market looks increasingly in need of consolidation, but at this point, a deep one is needed to rattle hedge funds holding the largest bet on higher prices since 2020,” reads a report from Saxo Bank A/S.
Bullion’s 27% rally this year has also been supported by robust purchasing by central banks and haven demand amid ongoing conflicts in the Middle East and Ukraine.
For Michael Cuggino, president at Permanent Portfolio Family of Funds, these bullish factors will help gold continue to trend higher over the long term despite some choppiness in prices in the near term.
