Gold hit a record high last week after Fed policymakers indicated they still expected to reduce interest rates by three-quarters of a percentage point by 2024-end despite recent high inflation readings.
“Unless there is significant news that indicates a speeding up of rate cuts, gold is unlikely to hit a new record high before Easter,” said Nitesh Shah, commodity strategist at WisdomTree. “However, we expect new records to be broken by the end of the year,” he said. WisdomTree expects gold prices to top $2,350 in the first quarter of 2025.
Traders are pricing in a 64% probability that the Fed will begin cutting rates in June, according to the CME Group’s FedWatch Tool.
The dollar index, meanwhile, slipped 0.4% against its rivals, making gold less expensive for other currency holders. Focus will now be on US core personal consumption expenditure price index data due on Friday.
Gold prices are also supported by elevated physical demand from Chinese households amid some skepticism about the prospects for the country’s real estate and stock market. This helped offset softening demand from price-sensitive Indian buyers.
Purchases by central banks, which are less price sensitive than retail consumers, also remain strong, providing further support to the metal. China’s central bank has been the most active buyer since late 2022.
“The motivating factor for their gold purchases is diversification away from the G7 currencies, after these currencies were weaponized in 2022 following the (Russia-)Ukraine war,” Shah said.
