Gold gains as rate-cut bets hold ground in run-up to inflation test

Gold prices rose on Monday, driven by expectations of interest rate cuts by the U.S. Federal Reserve this year even as traders await inflation readings this week for confirmation on the timing of these reductions.

Spot gold gained 0.5% to $2,175.68 per ounce as of 11:42 a.m. EDT (1542 GMT), while silver rose 0.2% to $24.71.

U.S. gold futures climbed 0.8% to $2,177.10.

The weekly initial jobless claims print is due on Thursday and will be followed by the U.S. core personal consumption expenditure (PCE) price index data on Friday. Market reaction to the PCE data may only be seen next week on account of the Good Friday holiday.

Gold can easily hit the $2,300 levels or higher in the second quarter, as discretionary traders and exchange-traded fund investors, who so far have not really participated in the rally, come into the market once rate cuts are confirmed, said Bart Melek, head of commodity strategies at TD Securities.

But stronger economic data can prompt a retreat in gold, Melek said.The dollar also pared some of last week’s gains, making bullion cheaper for overseas buyers.Gold hit record peaks last week after the Fed reiterated its view of three rate cuts in 2024.

Traders are pricing in a 70% probability of a June rate cut, versus 65% before the Fed’s March policy meet last week.

Lower interest rates tend to make zero-yield gold more appealing.

Gold also continued to draw support from strong central bank buying and safe-haven demand, analysts said.

Among autocatalysts, platinum gained 1.9% to $911.20 and palladium climbed 2.2% to $1,007.82.

Palladium’s demand from the auto industry will be supported for longer after last week’s new U.S. emissions law changes, which will effectively allow for more catalysed car sales in coming years, analysts at Heraeus wrote in a note.