Gold prices experienced a sharp rally on Tuesday, reaching an all-time high of $2,141.59 for XAU/USD, according to Reuters. The surge in gold prices was fueled by growing speculation that the US Federal Reserve (Fed) may consider easing its policy in response to reports indicating an economic slowdown in the services sector.
The XAU/USD spot is currently trading at $2,133.50, reflecting a significant increase of more than 2.40%. The catalyst for this surge was the revelation by S&P Global that business activity is slowing down, with February’s data softer than the previous month. Although the S&P Global Composite Index exceeded forecasts, concerns about economic slowdown persisted.
Further contributing to the surge in gold prices, the Institute for Supply Management (ISM) reported weaker-than-expected data, adding to the narrative of a potential economic slowdown. The US Department of Commerce’s disclosure that Factory Orders plunged added to the overall sentiment of economic concerns.
Following the release of these economic indicators, XAU/USD saw an upward movement from around $2,120, approaching the all-time high before settling. The downturn in US Treasury yields across both short and long maturities underscored the market’s apprehensions about economic conditions. The 10-year benchmark note rate, for instance, witnessed a significant drop to 4.135%, down by eight basis points (bps).
The surge in gold prices reflects investors seeking refuge in the precious metal amidst uncertainties surrounding economic performance and potential policy responses by central banks, particularly the Fed. The combination of disappointing economic data and a more dovish stance by central banks has heightened the appeal of gold as a safe-haven asset, prompting its rally to new historic highs.
