Gold Jumps to Record as Favorite Fed Inflation Gauge Fuels Rally

(Bloomberg) — Gold rose to a record after indications that the Federal Reserve is moving closer to a rate cut boosted a rally that was also driven by geopolitical tensions and robust Chinese demand.

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Bullion rose as high as $2,265.73 an ounce on Monday, up 1.6% from Thursday’s close, after setting a string of highs in recent sessions.

The Fed’s favorite gauge of underlying inflation – its main index of personal consumption expenditure – cooled in February, data showed on Friday, when many markets were closed. This strengthens the case for a reduction in financing costs, even though the central bank has taken a cautious tone.

A host of positive factors have pushed the precious metal up about 14% since mid-February. The prospect of monetary easing by major central banks and increased tensions in the Middle East and Ukraine have supported the rally. There has also been strong buying by central banks, especially in China, as consumers there have loaded up on precious metals amid ongoing problems in Asia’s largest economy.

After the inflation data, Fed Chairman Jerome Powell said the numbers were “broadly in line with our expectations” and that there was no rush to cut rates. Later this week, investors will have another chance to gauge the outlook for the US economy and central bank policies, with monthly payrolls set to rise by at least 200,000 for the fourth month in a row.

Swaps markets are pricing in a 61% chance of a Fed rate cut in June, up from 57% on Thursday. Lower interest rates are generally positive for gold, which pays no interest.

“Inflation data, and Powell’s comments in particular, have…

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