Gold prices edged lower on Tuesday as investors took profits following a record-breaking session. The decline came after growing optimism over a potential Federal Reserve rate cut and rising demand for safe-haven assets had pushed bullion to an all-time high.
The precious metal fell as much as 0.5%, hovering around $2,937 an ounce—approximately $20 below Monday’s peak of $2,956.19. Market expectations for the Fed’s next monetary easing have shifted significantly, with swap markets now predicting a rate cut two months earlier than anticipated just last week. Lower interest rates typically support gold, as the metal does not yield interest.
Meanwhile, geopolitical tensions escalated as former President Donald Trump took a series of measures targeting China in investment, trade, and other areas, heightening concerns over deteriorating U.S.-China relations.
Gold has also benefited from declining U.S. Treasury yields, which dropped following a strong auction for two-year notes that saw record demand. The decline in yields added to a broader rally in government debt, following weaker-than-expected U.S. business activity data last week. Lower yields generally enhance gold’s appeal as a non-yielding asset.
The shifting monetary policy outlook, combined with geopolitical uncertainty, has fueled renewed interest in gold-backed exchange-traded funds (ETFs). Last week, net inflows into these funds reached their highest levels since 2022, contributing to gold’s more than 12% gain this year.
“Mounting concerns over President Trump’s disruptive trade and geopolitical agendas are driving strong haven demand,” analysts at ANZ Banking Group Ltd., including Brian Martin, wrote in a note. “In recent weeks, there has been a discernible increase in physical flows into gold-backed ETFs.”
Looking ahead, investors will closely monitor Friday’s release of the core personal consumption expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, for further insights into the central bank’s policy trajectory. While inflation is expected to cool to its slowest pace since June, persistent price pressures could keep policymakers cautious.
As of 12:18 p.m. in Singapore, spot gold was down 0.5% at $2,937.65 an ounce. The Bloomberg Dollar Spot Index slipped 0.1%. Silver remained steady, while platinum and palladium edged lower.
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