Expectations of an impending interest rate cut by the U.S. Federal Reserve and continued gold demand from China have pushed the international gold price to an all-time high on the 1st. According to Bloomberg, international gold prices rose 1.6% from last Thursday’s close to record an all-time high of $2,265.73 per ounce.
Analysts believe that gold buying has increased as expectations for an interest rate cut by the Federal Reserve this year have risen following the announcement on the 29th of last month that the U.S. Personal Consumption Expenditures (PCE) Price Index for February was 0.1% lower than January, stabilizing at 2.8%. If the base interest rate is cut, the opportunity cost of investing in gold decreases, which can be a positive factor for the gold price. This is why the gold price has recently reached an all-time high.
However, Jerome Powell, Chairman of the Federal Reserve, reconfirmed that while the February PCE Price Index met the Federal Reserve’s expectations, a rate cut would require confidence that inflation is consistently moving towards the 2% target. Bloomberg analyzed that the anticipation of interest rate cuts by major central banks such as the U.S. Federal Reserve and heightened military tensions in the Middle East and Ukraine are also pushing the price of gold, a safe asset.
It also explained that China’s continued gold buying is driving the price of gold. The People’s Bank of China, China’s central bank, has significantly increased its gold holdings over the past 16 months to reduce reliance on the U.S. dollar and diversify its foreign exchange reserves. Also, as China’s economy slows, gold buying has become popular among young Chinese people.
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