Gold Rallies to Fresh All-Time High, Eyes $2,300 Amid Fed Policy, Geopolitical Risks

Gold futures eyed $2,300 on Tuesday, driven by a weaker US dollar and mixed Treasury yields. The yellow metal has been on a tear in recent weeks, with the US financial markets bracing for the Federal Reserve to cut interest rates in June. But others say that inflation fears reverberating could be a contributing factor to gold’s enormous rally.

June gold futures advanced $32.30, or 1.43%, to $2,289.50 per ounce at 18:53 GMT on Tuesday on the COMEX division of the New York Mercantile Exchange. Gold prices have added to their year-to-date gain of 10.5%. Over the last 12 months, the precious metal has rocketed more than 15%.

Silver, the sister commodity to gold, has also joined the Tuesday rally. May silver futures soared $0.982, or 3.92%, to $26.055 per ounce. The white metal has spiked nearly 9% year-to-date.

What has been driving gold’s ascent on Tuesday?

First, the US Dollar Index (DXY), a gauge of the greenback against a basket of currencies, tumbled 0.2% to 104.82. A weaker buck is good for commodities priced in dollars because it makes it cheaper for foreign investors to purchase.

Second, Treasury yields were mixed, with the benchmark ten-year yield topping 4.36%. The two-year yield fell below 4.7%, while the 30-year bond inched toward 4.51%. Gold is sensitive to fluctuations in interest rates because it influences the opportunity cost of holding non-yielding bullion.

Meanwhile, the futures market is pricing in a 70% chance of a rate cut at the June Federal Open Market Committee (FOMC) policy meeting. At the same time, with two consecutive months of hotter-than-expected inflation data, a chorus of economists argues that gold is rallying because it signals that the central bank could reignite inflation threats.

Geopolitical tensions are also playing a role in gold’s jump.

“We’re seeing some safe haven demand flowing into gold, which relates to the Israeli strikes on Iran’s embassy in Syria,” Daniel Ghali, commodity strategist at TD Securities, told CNBC.

In other metal markets, May copper futures tacked on $0.024, or 0.59%, to $4.0725 a pound. May platinum futures climbed $23.90, or 2.62%, to $935.30 per ounce. May palladium futures were little changed at $1,006.00 an ounce.

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