Gold’s relentless climb to new heights continued on Monday, with traders absorbing the latest data that showed a slowdown in U.S. business activity.
At the same time, they eagerly await key economic readings expected later this week, which may offer clues on the Federal Reserve’s next steps.
Spot gold remained comfortably above the crucial $2,600/oz. threshold set last week, edging up 0.2% to $2,627.34/oz. by mid-day. Earlier in the session, it reached a fresh record high of $2,635.05/oz.
Meanwhile, U.S. gold futures also rose, increasing by 0.3% to $2,653.70/oz. in New York trading.
Gold’s strong performance this year has been bolstered by recent actions from the Federal Reserve. The central bank’s decision to cut interest rates by half a percentage point last week only added fuel to what has been an extraordinary year for the precious metal.
Lower interest rates tend to benefit gold, as it is a non-yielding asset, making it more attractive in a low-rate environment.
Further rate cuts are widely anticipated, following comments from key Fed officials on Monday.
Neel Kashkari, President of the Federal Reserve Bank of Minneapolis, stated his expectation for further, albeit smaller, rate cuts specifically quarter-point reductions at the Fed’s two remaining meetings this year. “After 50 basis points, we’re still in a net tight position, so I was comfortable taking a larger first step,” Kashkari remarked in an interview with CNBC. He added, “As we go forward, I expect, on balance, we will probably take smaller steps unless the data changes materially.”
Similarly, Austan Goolsbee, President of the Federal Reserve Bank of Chicago, emphasized during a Q&A session that interest rates will need to be lowered “significantly” to safeguard the U.S. labor market and maintain economic stability.
While markets are digesting these remarks, attention is shifting toward U.S. personal consumption data and jobless claims, both due later this week. These figures will provide further insight into the Fed’s future policy direction and its approach to rate cuts.
Looking at the broader picture, gold’s 27% rally this year has been propelled not only by the Fed’s rate actions but also by substantial central bank purchases and increased safe-haven demand amid geopolitical uncertainty.
Ongoing conflicts in the Middle East and Ukraine have further strengthened gold’s appeal as a haven asset, driving prices higher.
Experts, such as Michael Cuggino, President of Permanent Portfolio Family of Funds, believe that despite short-term fluctuations, the bullish case for gold remains strong.
He expects the metal to continue trending upward over the long term, supported by these favorable macroeconomic factors.
With gold maintaining its momentum and hedge funds holding their largest bullish positions since 2020, the market seems poised for continued strength although some consolidation may be needed after such a significant rally.
However, the overall outlook remains optimistic, particularly as geopolitical risks and central bank policies continue to favor gold’s long-term trajectory.
