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Gold near a two-month high on US rate cut expectation


The price of spot gold decreased by 0.1% to $2,081.11 per ounce, but stayed close to $2,088.19, a level reached on Friday

Gold prices remained near a two-month high on Monday following weaker U.S. economic data, reinforcing expectations of a Federal Reserve interest rate cut in June.

The price of spot gold decreased by 0.1% to $2,081.11 per ounce, but stayed close to $2,088.19, a level reached on Friday – the highest level hit since December 28.

U.S. gold futures also dropped by 0.3% to $2,090.00.

The key drivers for gold is what’s going to happen on the interest rate front – and we saw a move higher in gold on Friday because a series of macro releases out of the U.S. moved the narrative towards the Fed potentially reducing rates sooner than expected, according to Marex analyst Edward Meir.

The increase in gold prices last week, around $50, was primarily driven by disappointing U.S. manufacturing and construction spending data, as well as easing price pressures indicated by the Fed’s preferred inflation measure.

The rally was also possibly on account of short-covering as a jump this big in just a short period indicates that “some of the shorts were caught off-guard,” said Meir.

Traders are now more optimistic about a rate cut in June, with the probability rising to 74% compared to around 65% the previous week. Lower interest rates make non-yielding bullion more attractive to investors.

The upcoming significant economic release in the U.S. will be the February employment report scheduled for Friday.

In the same period, spot platinum declined by 0.7% to $884.35 per ounce, while palladium increased marginally by 0.1% to $956.53. Both platinum and palladium have experienced a decrease of more than 10% since the beginning of the year.

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