Gold firmed after surging to a record high in the previous session, boosted by expectations for a U.S. interest rate cut, geopolitical tensions and risks of a stock market pullback.
Gold bullion prices rose to an all-time high of $2.141.79 an ounce on Tuesday, surpassing the previous high set in early December. The precious metal has gained almost 5% over the past five sessions.
Gold's rally came as a surprise to some in the market, especially since there was no significant change in expectations for when the Federal Reserve would lower borrowing costs. In the swap market, the probability of an interest rate cut in June is 62% (58% as of the end of February). Lower interest rates are usually positive for bullion, which does not bear interest.
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“The speed and speed of it was very sudden and very fast,” said James Steele, an analyst at HSBC Holdings. “He didn't appear to have a smoke bomb.”
Beyond interest rates, other factors contribute to gold's strength. Macro funds, which until recently were not active in the market, have become a new buying force. Bullion's role as a haven asset is also helped by rising tensions in the Middle East and disruption to global shipping, China's continued economic woes and the US presidential election at the end of the year.
Ole Hansen, commodity strategist at Saxo Bank A/S, said the risk of a correction in the U.S. stock market in the wake of Friday's weak manufacturing data may have led some investors to move from stocks to gold. said.
As of 9am in Singapore, spot gold was down 0.1% at $2,127.03 an ounce. The Bloomberg Dollar Spot Index rose 0.1%. Silver rose slightly, but platinum and palladium were flat.
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