Gold Prices Dip Slightly After Record High Amid Fed Rate Cut Speculation

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Investors Take Profits as Safe-Haven Demand and Economic Concerns Persist

Gold prices experienced a slight pullback as investors secured profits following a historic surge driven by increasing optimism about the Federal Reserve’s next interest rate cut and heightened demand for safe-haven assets. After reaching a new all-time high of $2,956.19 per ounce on Monday, bullion retreated by as much as 0.5%, settling around $2,937.65 per ounce in Singapore trading.

Market expectations for the Fed’s monetary policy shift have accelerated, with swap markets now predicting that the first rate cut could come two months earlier than initially expected. Lower interest rates generally support gold prices, as the metal does not offer interest income, making it more attractive in a low-yield environment.

Further fueling the gold rally, concerns over global economic stability intensified after President Donald Trump announced a series of measures targeting China’s investment and trade policies. The potential for escalating tensions between the world’s two largest economies has bolstered gold’s appeal as a hedge against geopolitical risk.

Meanwhile, US Treasury yields declined, driven by strong demand for a two-year note auction. The surge in government bond purchases followed weaker-than-expected US business activity data released last week. Lower bond yields typically enhance gold’s attractiveness since they reduce the opportunity cost of holding non-yielding assets.

In response to the shifting macroeconomic landscape, bullion-backed exchange-traded funds (ETFs) recorded their highest net inflows since 2022. Investors seeking stability in an uncertain economic climate have significantly increased their physical gold holdings. Analysts at ANZ Banking Group Ltd. noted a marked rise in gold-backed ETF flows, attributing it to growing apprehension about President Trump’s trade policies and global market volatility.

Market participants now turn their attention to the upcoming release of the core Personal Consumption Expenditures (PCE) Price Index on Friday. As the Federal Reserve’s preferred inflation gauge, the index is expected to show the slowest price growth since June. However, policymakers may remain cautious due to the overall sluggish pace of inflation moderation.

At midday in Singapore, spot gold traded at $2,937.65 per ounce, marking a 0.5% decline. The Bloomberg Dollar Spot Index softened by 0.1%, while silver remained steady. Platinum and palladium also experienced slight declines as investors assessed broader market trends.

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