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Wednesday, 22. May 2024

Gold prices surged to record highs surpassing $2,350, despite diminishing expectations for rate cuts


In Asian trade on Monday, gold prices soared to record highs, displaying resilience against decreasing expectations of U.S. rate cuts. The surge was attributed to ongoing safe-haven demand for the yellow metal, with investors eagerly awaiting further cues on the U.S. economy.

Despite technical indicators signaling that gold was firmly in overbought territory, typically suggesting limited upside potential, the rally in gold persisted.

Indeed, spot gold surged by as much as 0.7% on Monday, hitting a record high of $2,353.81 per ounce, while gold futures expiring in June rose by 0.8% to reach a record high of $2,372.45 per ounce.

Gold ignores reduced rate cut expectations, awaits CPI data.

Gold prices increased as the dollar exhibited limited reaction to a robust nonfarm payrolls report for March.

The report, released on Friday, indicated that the U.S. labor market remained robust, providing little incentive for the Federal Reserve to commence early interest rate cuts.

However, the dollar displayed minimal strength following the reading, allowing gold additional room to ascend. Uncertainty surrounding U.S. rates persisted, especially with significant focus on upcoming consumer price index inflation data scheduled for release this Wednesday.

Traders were observed largely reducing their bets on the possibility of the Fed cutting rates as early as June, according to data from the CME Fedwatch tool.

However, escalating global geopolitical tensions continued to sustain safe-haven demand for gold. The ongoing conflict between Russia and Ukraine persisted, with fresh strikes on the Zaporizhzhia nuclear plant raising concerns.

In the Middle East, worries about potential conflict between Iran and Israel persisted, despite indications of peace talks between Israel and Hamas in Egypt.

On Monday, other precious metals also saw gains. Platinum futures increased by 0.1% to $941.70 per ounce, while silver futures rose by 1.5% to $27.965 per ounce.

Copper prices retreated slightly from their 15-month highs

Among industrial metals, copper prices experienced a slight decline on Monday, as investors engaged in mild profit-taking following last week’s surge to 15-month highs.

Three-month copper futures on the London Metal Exchange dipped by 0.2% to $9,333.50 per ton, while one-month U.S. copper futures declined by 0.3% to $4.2287 per pound.

Copper received a boost from a series of favorable economic reports from China, its largest importer, indicating a resurgence in business activity within the country.

Prices were further lifted by the prospect of tighter refined copper supplies, as leading Chinese refiners hinted at possible production cuts.

Further economic data from China is expected later this week, notably inflation and trade figures for March.

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