Gold glitters at two-month high amid fed rate cut expectations

Gold hits 2-month peak: Gold prices hit a two-month high on Monday, buoyed by weaker economic data from the United States last week, which solidified expectations of an interest rate cut by the Federal Reserve in June.

Spot gold edged 0.1 per cent lower to $2,081.34 per ounce as of 0630 GMT, but remained near $2,088.19, a level last seen on Friday when the contract reached its highest since December 28. US gold futures fell 0.3 per cent to $2,090.10.

Gold price drivers

Edward Meir, an analyst at Marex, stressed that the primary driver for gold is the potential for changes in interest rates. Gold prices rose approximately $50 last week, with the bulk of gains occurring in the final two days, in response to disappointing US manufacturing and construction spending data, as well as easing inflation concerns reflected in the Federal Reserve's preferred inflation gauge.

Meir suggested that the significant increase over a short period might indicate that short-sellers were caught off-guard and had to cover their positions.

Traders have become more optimistic about a rate cut in June, with the probability estimated at 74 per cent, compared to about 65 per cent the previous Monday, according to LSEG's interest rate probability app. Lower interest rates tend to increase the appeal of non-yielding assets such as gold.

Platinum and palladium update

In contrast, spot platinum fell 0.6 per cent to $881.22 per ounce, while palladium remained steady at $955.71. Both metals have seen declines of more than 10 per cent so far this year. Platinum mining companies in South Africa are facing a crisis as the prices of the auto-catalyst metal continue to dwindle. Spot silver also fell by 0.6 per cent to $23.01.

(With Reuters Inputs)