Gold futures ended trading on Monday at a record high level as investors weighed the possibility that the Federal Reserve may move sooner to cut interest rates.
Gold futures settled at $2,125.80, up $30, or just under 1.5% on Monday. That is the highest level that gold prices have been since the contract’s creation in the 1970s. The move higher comes a week after a key inflation report indicated price pressures are easing.
Gold prices have risen nearly 16% since a low in October.
Bullion prices are, in part, influenced by perceptions that the Fed might begin to cut rates in the coming months, given that the pace of inflation has been meaningfully falling. Higher interest rates encourage investment in bonds, and that, coupled with a weaker dollar if interest rates are driven down, could be good news for gold investors.
Driving some of the sentiment about rate cuts is the most recent personal consumption expenditures index report, which is the Fed’s preferred gauge of inflation.
Inflation fell two-tenths of a percentage point to a 2.4% rate for the year ending in January, the Bureau of Economic Analysis reported last week in an update to the PCE index. That marks the lowest rate of PCE inflation since February 2021.
The report is causing investors to predict that the Fed might start further loosening its monetary policy at coming meetings.
Right now, the overwhelming majority of investors expect the Fed to once again hold rates steady following the March meeting of the Federal Open Market Committee, according to the CME Group’s FedWatch tool, which calculates the probability using futures contract prices for rates in the short-term market targeted by the Fed.
But the odds of a May rate cut are rising, and the implied odds of such a move are now over 20%, up from 12.6% a week ago before the most recent PCE report was released. At the very least, most investors expect rates to be slashed at least once by the time the Fed’s June meeting has concluded.
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But bullion prices aren’t the only non-stock asset that was rising on Monday. Bitcoin is now nearing a record level.
Bitcoin was hovering around $67,000 on Monday afternoon, just under $2,000 shy of a new all-time record. Bitcoin has now increased in value by a whopping 200% over the past year alone, far outperforming most other investments.
