Gold prices hit record high amid expectations of interest rate cut

Gold prices have reached a new all-time high as investors eagerly anticipate a potential Federal Reserve interest rate cut in June.

On Tuesday, spot gold (XAUUSD:CUR) surged +1.15% to $2,139.24 an ounce, surpassing the previous record of $2,135.39 set on Dec. 4 last year.

“The current market conditions, with a weakening dollar and the anticipation of a Fed rate cut, have created a perfect storm for gold prices,” said Tobi Opeyemi Amure, an analyst at Trading.Biz.

“We expect this bullish trend to continue in the near term, as investors seek safe-haven assets amid economic uncertainties.”

The precious metal’s rally has been fueled by several factors, including:

• Safe-haven demand amid geopolitical tensions in the Middle East
• Strong buying by central banks globally
• Expectations of a transition from tightening to easing monetary cycle

According to analysts at ANZ, geopolitical uncertainty, steady physical and central bank purchases, and a shift from a tightening to an easing monetary cycle are expected to drive the gold price toward $2,200 per ounce by the end of the year, as outlined in a recent note.

According to JPMorgan Commodities Research, the estimated value of open interest in precious metals has increased by 6% week-on-week to approximately $150 billion, the highest level in six weeks. “Inflows were compounded by bullish price action later in the week, a move that has further extended to start this week with gold prices jumping above $2,100/oz,” the research note stated.

Major precious metals stocks closed with gains following the record-breaking gold prices, including:

• Eldorado Gold (EGO)
• Newmont (NEM)
• Agnico Eagle Mines (AEM)
• Barrick Gold (GOLD)

Silver prices have also demonstrated a strong performance recently, driven by expectations of a potential rate cut in June and fresh buying.

As investors eagerly await Federal Reserve Chair Jerome Powell’s testimony to the US Congress later in the week, which could provide clearer indications on the timing of rate cuts, gold prices are poised for further gains.