Gold prices jumped by another 0.9%, again setting a new record high (for the eighth consecutive session), helped by active purchases of precious metals by Central Banks and increased demand for safe haven assets amid persistent tensions in the Middle East.
According to the People's Bank of China, the nation has increased its gold reserves for 17 consecutive months since November 2022. As of the end of March, China's gold reserves exceeded 72.7 million ounces.
Since mid-February, gold has risen by more than 18%, and at least in part this increase was caused by optimism that the Fed is approaching a rate cut. For the year, bullion is up by double digits at 13%, despite headwinds from strong US economic data.
Investors are now preparing for the publication of US inflation data, which may affect the timing of the Fed's monetary policy easing. Economists expect that the March data on the consumer price index (CPI), which will be published tomorrow, will provide additional evidence of a gradual easing of price pressure, with the core CPI projected to rise by 3.7% per annum after an increase of 3.8% per annum in February. If the forecast is confirmed, it will be the weakest annual increase since April 2021. After a strong U.S. jobs report last Friday, the market pared expectations for the number of rate cuts this year to two, from three to four a few weeks ago. According to the CME FedWatch Tool, markets see a 0% probability of a 25 basis point rate cut at the Fed meeting in May, and a 51.3% probability of a rate cut in June (compared to 63.7% a week earlier).
Some experts expect that the rise in gold prices will continue at least until the second half of the year, as the precious metal is considered as a developed market “recession hedge", while the volatility caused by the ongoing wars in Ukraine and the Gaza Strip may provide additional support to gold prices.