Gold Price Surge Continues on Rate Cut Hopes
At 0958 GMT, June gold futures on the New York Mercantile Exchange were up 0.1% at $2,388.4 a troy ounce, indicating a rise in gold prices over the week due to renewed hopes for Federal Reserve interest-rate cuts. Futures reached a high point of $2,402.7 on Thursday, the highest since April 22, and are currently up 0.5% for the week.
Market Sentiment and Impact on Gold Price
The surge in gold prices comes as U.S. inflation eased slightly in April, aligning with expectations. Softer U.S. Consumer Price Index data on Wednesday provided relief to the precious metal after three months of upside inflation surprises had raised doubts about potential interest-rate cuts by the Federal Reserve. Gold prices are known to be inversely related to interest rates; higher rates tend to dampen the appeal of non-interest-bearing assets like gold.
Saxo Bank’s head of commodity strategy Ole Hansen predicts that once the interest rate cut cycle begins later this year, gold will likely see increased demand from ETF investors. These investors have been net sellers since 2022 when the interest-rate cycle began, indicating a potential shift in sentiment towards gold as a safe-haven asset.
Future Outlook for Gold Prices
Hansen notes that while there is a buy-on-dip interest that could support the gold market, the question remains whether the current momentum is sufficient to drive prices to a new record high. The uncertainty surrounding the future direction of interest rates and geopolitical tensions continue to influence the gold market.
Overall, the outlook for gold prices remains positive as investors closely monitor developments in central bank policies and global economic conditions. The current environment of uncertainty and market volatility underscores the appeal of gold as a safe-haven asset, potentially leading to further price gains in the near future.
