Gold Inches Close to Two-Month Peak as U.S. Rate Cut Expectations Gain Traction

On Monday, gold prices were seen oscillating near their highest level in two months. This surge aligns with the mounting speculation that the U.S. Federal Reserve might implement a rate cut as early as June, a prospect bolstered by last week's weaker U.S. economic data that led to a downtick in both the dollar value and treasury yields.

Market Fundamentals

Spot gold recorded a slight fall of 0.2% dropping to $2,080.09 per ounce around 0152 GMT, following Friday's peak of $2,088.19 - a zenith not observed since the latter part of December. Concurrently, U.S. gold futures showed a 0.3% decrease landing at $2,088.60.

Friday's retreat in the pivotal U.S. 10-year Treasury yields and the dollar index came on the heels of data that underscored a greater-than-expected falter in U.S. manufacturing for February and an unforeseen decline in January's construction spending. Such indicators invariably imbue gold, which does not yield interest, with greater allure, especially when weighed against a weakened dollar and diminishing bond yields.

A tepid outcome from the University of Michigan's consumer sentiment survey coupled with emerging difficulties at the regional banking institution, New York Community Bancorp, collectively intensified the appeal of gold as a safe-haven asset.

Additional data from Thursday hinted that the annual rise in U.S. inflation for January was the most modest it has been in nearly three years, keeping the possibility of a mid-year rate reduction by the Fed very much alive. The appeal of non-yielding bullion is augmented by lower interest rates.

Investors now keenly await the forthcoming U.S. employment report for February, slated for release on Friday.

COMEX gold speculators, in a display of optimism, augmented their net long positions by 3,694 contracts to 68,042 in the week that ended on February 27th, as per the most recent data.

The mining industry witnessed its own share of challenges, with the CEO of Northam Platinum characterizing the sector's current predicament as the grimmest in three decades, which comes in the wake of Impala Platinum contemplating shuttering loss-making shafts should the market not bounce back.

Prices for other precious metals showed a mixed picture. Spot platinum dipped by 0.3% to $884.15 per ounce, palladium held steady at $957.88, while silver saw a 0.6% decline to $23.02.

Upcoming Economic Indicators

Traders and analysts will also pay close attention to imminent economic events and speeches, including remarks from the U.S. Fed's John Harker, and Japan's CPI data for February.

Gold, RateCut, Economy