Gold continued its rally, reaching new record highs.
This surge was driven by last week’s softer U.S. inflation data, which supported expectations that the Federal Reserve would begin cutting interest rates in June.
The data released on Friday showed that the PCE price index rose 0.3% month-on-month in February which was in line with market consensus projections. Following the report, Fed Chair Jerome Powell commented that the data aligned with the central bank’s objectives.
While expectations of lower interest rates and their implementation could support gold over the short and long term, the asset could see increased demand from investors as geopolitical tensions remain a source of concern. Demand from central banks could also continue to support gold over the long term.
However, the asset could see some pressure on demand in jewelry markets due to the high prices. In India, the world’s second-largest consumer of precious metals, demand for gold could decline, weighing on prices. At the same time, gold prices could see some downside risks over the short term after March’s surge as traders could move to secure their gains.
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