As the dollar has been weakening in recent weeks due to rising expectations that the US Federal Reserve may lower interest rates in the new year, gold reached a record high on Monday. The price of the precious metal, which is considered a safe haven investment, peaked at $2,135.39 per ounce.
Later, profit-taking took hold, and it traded at $2,069.01. The dollar strengthened on Monday as well. Analysts claim that gold is also profiting from the Israel-Hamas conflict.
“Concerns about the shaky global economic backdrop and the Israel-Hamas conflict have fuelled investor demand for safe-haven assets like gold,” said Victoria Scholar, head of investment at Interactive Investor.
“Plus, expectations for Fed rate cuts next year have put downward pressure on the US dollar which is trading around three-month lows, adding to gold’s attractiveness.”
Meanwhile, optimism that the US will soon permit wider trading of the largest cryptocurrency in the world helped to push bitcoin beyond $40,000 for the first price since May of last year.
While oil prices declined, major stock markets in Europe and Asia saw the largest declines. Attempts by Fed Chairman Jerome Powell to dampen expectations of US rate reduction in the first quarter of 2024 are being dismissed by traders.
After more than a year of rises that have driven borrowing prices to a two-decade high, Powell’s statement on Friday that the Fed was “well into restrictive territory” increased bets for a monetary policy easing.
Central banks around the globe have sent interest rates soaring, helping to bring down surging inflation. Bloomberg reported that traders saw a 60 percent chance of a US rate cut, while they have fully priced in one in May. “Markets are piling in on the rate cut bets,” said Kyle Rodda at Capital.com. He added that recession risks added to gold’s appeal.
Bitcoin broke back above $40,000 on hopes that firms including BlackRock would be given US approval to sell the first spot Bitcoin exchange-traded funds. Bloomberg said a batch of the products is thought to be given the go-ahead by the Securities and Exchange Commission by next month.
In equities trading, troubled developer China Evergrande briefly surged more than 13 percent after a court in the city allowed extra time to form a restructuring plan aimed at avoiding liquidation.
The firm, which defaulted on a debt repayment in 2021 and has reported more than $300 billion in liabilities, was hit with a winding-up petition and faces liquidation if officials decide its proposal is not sufficient.
