Rate cuts are coming: Gold prices hit a record high

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Rate cuts are coming: Gold prices hit a record high
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  • Gold prices surged Monday to a record high of $2,265.73 an ounce.
  • The Fed's preferred gauge of underlying inflation came in as expected Friday, affirming 2024 rate-cut hopes.
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The price of gold rallied to another record high on Monday, following fresh inflation data from Friday that boosted rate-cut hopes.

The yellow metal climbed as much as 1.6% to a new high of $2,265.73 an ounce.

The year-over-year index of personal consumption expenditures rose 2.5% in February, in line with economist expectations. Core PCE, which excludes food and energy prices, rose 2.8% for the month, also in line with estimates. The results have fueled anticipation that the central bank's first rate cut will come in June.

Typically, a lower-rate environment makes holding gold more alluring compared with other assets such as bonds, which yield lower returns when interest rates drop.

Federal Reserve Chair Jerome Powell also applauded the latest US inflation data, saying it's "along the lines of what we would like to see" during his speech on Friday, which echoed his reiteration in last month's policy meeting of a rate cut for this year.

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The surging bullion price was also pushed up by its robust overseas demand, as global central banks are shifting away from dollar reserves because of geopolitical risks.

On the other hand, China's struggling stock and real-estate markets have forced many investors to pivot to the "safe haven." In February, the People's Bank of China acquired about 390,000 troy ounces of the precious metal. Overall, China's central bank now holds about 72.58 million troy ounces of gold, equivalent to about 2,257 tons.

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