The gold bulls are racing towards the end of the first quarter, with several days of gains resulting in a new record high being set yesterday (Tuesday). Prices surged to £1,685 ($2,141) on the back of fresh expectation that the Federal Reserve will initiate rate cuts as early as June as the economy emits signs of contraction.
The fears of a real economic slowdown were ignited on Friday when data from the Institute for Supply Management showed a marked decline in the Manufacturing Index. Gold surged by £32 ($41) in the aftermath and that upwards trajectory has been maintained in the days since.
ActivTrades senior analyst, Ricardo Evangelista said that numerous factors have aligned to give gold the boost it needed to smash another price record. He explained, “Concerns surrounding global economic prospects, geopolitical tensions, and shifting expectations towards earlier interest rate cuts have fuelled increased demand for the precious metal, leading to its upward price trajectory.”
With the last record high set as recently as December, it appears to be only a matter of time before this record is also crushed and replaced with an even higher figure.
We could even see new highs coming within the next few days, as Federal Reserve Chairman Jerome Powell is set to testify before the House and Senate committee on Capitol Hill later today. In that testimony, he could provide more insight as to when rate cuts will begin and give a clearer idea of what the Federal Reserve will do next.
The CME’s FedWatch tool currently has a 72.8% probability reading of June rate cuts. If Powell’s comments support that prediction – or suggest that action could be taken sooner in the face of disappointing manufacturing data – expect the gold bulls to take flight and race towards an even more impressive record.
Of course, it isn’t just the Federal Reserve’s actions which could trigger further gains. Any hint of increased tension in the Middle East could also send prices spiking. The yellow metal has gained around £235 ($300) since the start of the conflict in October.
Don’t wait for prices to rise further. Buy now.
