Gold closes up 2%, with Fed betting on interest rate cuts by June | Economy

Gold closed up 2% this session, given the relief in Treasury returns. Assets responded to new economic data from the US and speeches from Federal Reserve (Fed) officials, which, in general, reinforced expectations that the American Central Bank will relax policy until June.

On Comex, the metals division of the New York Mercantile Exchange (Nymex), gold scheduled for delivery in April closed the session up 1.99%, at US$2,095.70 per troy ounce.

Gold appreciated 2.25% in the week, as investors increasingly placed their bets on interest rate cuts by the Fed in June.

Today, this view was supported by data from the industrial purchasing managers index (PMI) as read by the Institute for Supply Management (ISM), consumer sentiment and construction investments, released in this morning. Fed officials Austan Goolsbee and Tom Barkin also expressed confidence in the disinflation trajectory, pointing out that January’s price indexes do not necessarily mean a reacceleration trend.

With monetary relaxation approaching in the US – there are only two meetings left until June – expectations are positive for gold. This is because interest rate relief tends to put downward pressure on Treasury yields, with which the metal competes for also being a security asset.

Capital Economics is predicting that the price of gold will rise in the coming years, supported by interest cuts even faster than the market is expecting, falling yields and the depreciation of the dollar.