Gold prices surge to all-time high due to Federal Reserve rate-cut speculations and increasing demand for safe-haven assets

Gold Surges to All-Time High on Fed Policy Optimism and Geopolitical Tensions

Gold prices soared to record levels on Monday, driven by increasing optimism that the Federal Reserve will implement monetary policy easing and escalating geopolitical tensions in the Middle East.

The precious metal rose by as much as 1.4% to reach $2,450.07 an ounce in Asian trading, surpassing the previous intraday high set in April. Traders have been ramping up their bets in anticipation of the Fed potentially lowering interest rates as early as September, a move that would boost gold’s appeal as it does not offer any yield.

Last week, the US dollar weakened and Treasuries surged after data showed that April inflation had eased more than expected. This development provided support for gold, which is priced in US dollars.

The helicopter crash involving Iranian President Ebrahim Raisi on Sunday and the missile attack on a China-bound oil tanker in the Red Sea on Saturday heightened concerns over geopolitical risks in the region, further propelling gold’s safe-haven status.

Nicholas Frappell, global head of institutional markets at ABC Refinery in Sydney, attributed gold’s rally to uncertainty surrounding the events in Iran. He noted that investors are possibly making assumptions based on limited information and are hesitant to unwind their positions due to lower liquidity levels in Asia.

Hedge funds trading Comex futures increased their bullish bets on gold to a three-week high in the week ending May 14, hinting at a breakout from the narrow trading range seen in recent weeks amid uncertainty about the US interest rate trajectory. Gold prices have surged nearly 20% year-to-date, building on a strong rally that set multiple records in April.

Central-bank purchases, strong demand from Asian markets, particularly China, and heightened geopolitical tensions in regions like Ukraine and the Middle East have all contributed to gold’s strength.

As of 1:59 p.m. in Singapore, spot gold climbed by 1.4% to $2,449.27 an ounce. The Bloomberg Dollar Spot Index remained steady after a 0.7% decline last week. Silver, palladium, and platinum also saw gains.

Silver, which reached its highest level since December 2012, benefited from a robust rally on Friday fueled by growing investor interest in physical metals markets amid tightening supply conditions, particularly in copper. Unlike gold, silver is viewed as both a precious metal and an industrial commodity due to its applications in solar panels.

The surge in gold and silver prices underscores the impact of a combination of factors such as monetary policy expectations, geopolitical tensions, and supply dynamics on precious and industrial metals markets.

Despite the uncertainties in the global economy and financial markets, gold and silver continue to attract investors seeking safe-haven assets and inflation hedges amid the ongoing volatility.

Investors and market participants will closely monitor developments in central bank policies, geopolitical events, and economic indicators for further cues on the direction of precious metals prices in the coming months.

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