Gold (XAU/USD) prices reached a new record high on Monday, underscoring the persistent demand for -haven assets. Despite the robust economic strength in the United States, this surge in the yellow metal, which had previously dampened hopes for an early rate cut, is a significant market trend.
GOLD – 4 Hour chart
Spot gold jumped by 0.9% to $2,249.95 per ounce, and gold futures expiring in June increased by 0.8% to settle at $2,257.10. However, the price had reached as high as $2,286.35 during intraday trading before the release of US manufacturing data.
The unexpected expansion in US manufacturing activity, which increased Treasury yields and the dollar, was a critical factor in Monday’s record-high gold prices. This unpredictability in market dynamics adds an intriguing element to the gold price surge.
The ISM manufacturing purchasing managers’ index unexpectedly improved from 47.8 to 50.3. This exceeded the threshold of 50, signalling an expansion in manufacturing for the first time since September 2022. Subsequently, the probability of a rate cut in June declined from 64% last week to 56%.
Despite the robust economic data, the core PCE price index, the Federal Reserve’s preferred measure of inflation, experienced an unexpected slowdown in February. This suggests that the recent surge in inflation may have been an anomaly relative to the ongoing disinflation trend.
In a recent note, Morgan Stanley expressed its view, stating it maintains its forecast of an initial rate cut in June. The firm believes that core PCE will average 0.22% from March to May. These lower figures will provide sufficient evidence of sustainable disinflation toward the target.
The sentiment for -haven gold has also been influenced by geopolitical tensions, particularly following reports from Iranian and Syrian media that an Israeli strike targeted a building near the Iranian embassy in Syria’s capital on Monday.
