Markets

Gold climbs to new record before pivotal US inflation data

Move has puzzled analysts with no obvious catalyst

Bullion rose as much as 1 per cent – reversing an earlier loss – as traders assessed where policymakers now stand on the timing of their pivot to lower borrowing costs. Photograph: Andreas Gebert/Bloomberg

Mon Apr 8 2024 - 15:37

Gold drove higher to a fresh record above $2,350 (€2,165) an ounce as investors shifted focus to a key US inflation reading later this week, while geopolitical risks also added to its appeal.

Bullion rose as much as 1 per cent – reversing an earlier loss – as traders assessed where policymakers now stand on the timing of their pivot to lower borrowing costs, in advance of March inflation data on Wednesday. The Federal Reserve expects to cut this year, but needs to see more evidence that inflation is easing first. Higher rates are typically negative for gold, which doesn’t pay interest.

The precious metal remains supported well above $2,300 (€2,219), after notching a series of fresh all-time highs in recent weeks. Yet, the move has left some onlookers puzzled amid a lack of any obvious trigger for the sudden rally that began in mid-February – especially as traders have unwound bets for steep rate cuts during that period.

Gold is up more than 18 per cent since then, with at least some of the gains fuelled by optimism that the Fed was getting closer to cutting rates. Central Bank demand has also been a factor, with the People’s Bank of China reporting an addition for a 17th straight month in March.

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Elsewhere, bullion has benefited from increased haven demand amid persistent tensions in the Middle East. Israel said Sunday the country is removing some troops from southern Gaza after prime minister Binyamin Netanyahu said victory was within reach. Iran is preparing a response to a suspected Israeli attack on its consulate in Syria, while Hizbullah warned that it’s ready for war.

Spot gold was 0.2 per cent higher at $2,335.38 (€2,151.35) an ounce, after earlier touching a record $2,353.95 (€2,168.46). The Bloomberg Dollar Spot Index was little changed. Silver rose, while platinum and palladium were mixed. – Bloomberg

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