Gold reaches a new historical high amid expectations of a Fed rate cut

Gold continues to rise, reaching $2276.9 per ounce in anticipation of a Federal Reserve interest rate cut

Gold
Gold, illustrative photo / pixabay.com

On Monday, gold continued its ascent, reaching a price of $2276.9 per ounce, which is 1.7% higher than last Thursday, when its value was already at a historical high.

This jump occurred against the backdrop of investors' expectations that the Federal Reserve System of the USA might soon begin to lower interest rates.

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In March, the price of gold rose by 8.9%, and for the first quarter of the year, it increased by 8%

Experts link this "unprecedented rally" to softer-than-expected inflation data in the USA, which prompted the Federal Reserve to reconsider rates as early as June.

In February, the PCE index in the USA rose by 0.3%, which was less than analysts' forecasts, who expected the growth rate to remain at 0.4%, as in January.

It is worth noting that the growth of the PCE Core index, excluding food and energy resources, also slowed down to 0.3%.

Markets are now approximately 70% certain that the Fed will reduce the base rate in June, possibly by 75 basis points from the current range of 5.25-5.5% annually.

Experts emphasize that low interest rates make gold a more attractive investment asset.

Investors are confident that the Fed will cut rates regardless of whether inflation reaches the target level.

Managing Partner at SPI Asset Management, Steven Innes, notes that the demand for gold is also rising because central banks of developing countries are increasing their reserves of the precious metal.

Previously, the head of the Bundesbank, Joachim Nagel, signaled a possible reduction of the ECB's key rate as early as June, emphasizing this step despite existing risks for the European currency.

And the Bank of England maintained the interest rate at 5.25%, indicating an imminent fall in inflation to below 2%.

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