Price Reaches Record High Amid Expectations of Fed Rate Cuts

The spot price of gold reached a record high above $2,450 per ounce early Monday morning, before sliding to $2,435.28 by 2 p.m. ET as markets continued to digest economic data from last week that raised hopes the Federal Reserve could move to cut interest rates, though Fed officials cautioned they may need more data on inflation before cutting rates.

Scheduled comments this week from a number of Fed officials could impact the price of gold in the days to come, along with fresh economic data and geopolitical events.

Markets Still Pricing in Expectations of Rate Cuts

Last week’s report on consumer prices showed inflation slowed in April, raising hopes the Fed may be encouraged to lower borrowing costs, though Fed policymakers have cautioned several times over the last month that they would need more data on inflation before cutting rates, and some have said that raising rates is still possible.

Market participants are currently pricing in an over 63% chance of rates being cut at the Fed’s September meeting, and a more than 74% chance of rates being cut at the Fed’s November meeting, according to the CME’s FedWatch Tool, based on fed funds futures data.

Purchases by China’s Central Bank and Geopolitical Events Could Drive Gold Higher

Purchases by China’s central bank could help sustain gold’s rise in price, with the The World Gold Council (WGC) recently reporting China’s central bank was one of the top buyers of gold in the first quarter compared to other central banks.

Concerns about geopolitical risks in the Middle East and Eastern Europe could also impact the price of gold, raising demand for traditional “safe haven” assets. The death of Iranian President Ebrahim Raisi and worries about his death’s implications in the Middle East was another factor that drove the price of oil higher Monday, The Wall Street Journal reported.