Spot gold was 0.3% higher at $2,238.18 per ounce after reaching an all-time high of $2,265.49 earlier in the session
Gold prices pared gains on Monday as the dollar and bond yields rose, after the bullion soared to a new record high on growing expectation that the U.S. Fed could deliver the first interest rate cut in June.
Spot gold was 0.3% higher at $2,238.18 per ounce as of 1750 GMT after reaching an all-time high of $2,265.49 earlier in the session.
U.S. gold futures settled 0.9% higher at $2,236.5.
The view out there is that the Fed will likely start trimming rates significantly before the time we reach the 2% inflation target based on what we have seen on the PCE data, according to Bart Melek, head of commodity strategies at TD Securities.
Data on Friday showed U.S. prices moderated in February, keeping a June interest rate reduction from the Federal Reserve on the table. Fed Chair Jerome Powell said February’s inflation data was “more along the lines of what we want to see.”
Gold tends to gain when interest rates are low, which reduces the opportunity cost of holding non-yielding bullion.
Growing rate cut expectations, safe-haven demand and central bank purchases amid geopolitical tensions have bolstered gold by over 8% this year.
Nonetheless, the dollar added 0.5% to a more than four-month high against peers, making gold more expensive for other currency holders, while yields on 10-year Treasury notes also jumped.
Fed officials will probably caution the market that they do not necessarily have to get aggressive on cuts. There is no guarantee that the U.S. central bank will start cutting rates, and I think they will make that quite apparent and that may cause some reversals here, Melek said.
