In the early hours of Monday's Asian trading, gold prices (XAU/USD) surged to unprecedented heights, flirting with £2,250 per troy ounce. This surge was driven by a blend of factors: prospects of a Federal Reserve (Fed) policy shift in the latter part of 2024, simmering tensions in the Middle East, and upbeat sentiments surrounding China's economic rebound.
Market sentiment leans towards further monetary easing by major central banks, with a notable 68.5% probability of a quarter-point rate cut by the US Fed by June, as per the CME Fedwatch Tool. Fed Chair Jerome Powell's remarks on Friday about US inflation data being within expectations solidified the Fed's stance on potential interest rate adjustments for the year, favouring lower rates which typically buoy gold prices, given its non-interest-bearing nature.
Recent economic data, while generally aligned with expectations, has added to market jitters. Geopolitical tensions escalated with Hezbollah's claim of responsibility for attacks on Israeli troops, potentially enhancing gold's status as a safe-haven asset.
Furthermore, positive Chinese Purchasing Managers Index (PMI) data for March contributed to gold's momentum, signalling robust economic growth in China.
Looking forward, attention is fixed on China's Caixin Manufacturing PMI for March and the US ISM Manufacturing PMI. A stronger-than-anticipated US PMI could fortify the US Dollar (USD) and impose a ceiling on gold's immediate growth potential.
