Gold surges to record highs as bets mount for US rate cut

Gold prices have soared to record highs, fueled by growing expectations of a US Federal Reserve rate cut later this year.

Spot gold climbed 0.8% to $2,149.86 per ounce on Wednesday, surpassing its previous record set earlier in the day at $2,148.99.

The rally comes after Federal Reserve Chair Jerome Powell hinted at the possibility of a rate cut in his recent remarks, boosting the appeal of gold as an investment.

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Historically, high US interest rates make the dollar more attractive to investors, putting downward pressure on gold prices. However, the prospect of a rate cut weakens the dollar’s appeal, making gold a more compelling alternative.

Analysts believe that recent economic data and market expectations are driving the rally beyond its fundamental value, with traders now seeing a 70% chance of a Fed rate cut in June.

Furthermore, gold-backed investment funds are heavily invested in the precious metal, holding close to 80% of their historical maximum long position.