Spot gold rose as much as 2.2% on Friday, surpassing the previous record set last month, as a disappointing reading on the U.S. housing market reinforced expectations for quick and deeper cuts by the Federal Reserve. Lower rates are generally positive for gold since it does not pay interest.
The precious metal has risen more than 20% this year amid growing optimism about monetary easing and great purchases for central banksIt has also seen increased demand as a safe haven asset due to the rise geopolitical risksincluding tensions in the Middle East and Russia’s war with Ukraine.
Gold began to rally at the start of the year, surprising seasoned and veteran analysts as there was not always a clear macroeconomic catalyst to justify its price rise. It held on to those gains even as traders reduced their bets on the timing of rate cuts. More recently, gold has edged higher as U.S. officials are expected to begin cutting rates soon.
A raft of recent US data activity has convinced markets that the US central bank is on the verge of cutting borrowing costs from a more than two-decade high, with conventional drivers of the metal coming back to the fore.
There is debate over how deeply the Federal Reserve might cut rates, given that recent economic readings have given mixed signals about the state of the US economy.
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