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Gold Hits Record Amid Unexpected Rise in US Manufacturing

Gold prices hit new record highs on Monday as investors’ sentiment for the yellow metal picked up amid the US dollar’s rise following the world’s largest economy showing indications of robust activity, which weakened expectations for an early interest rate cut from the Federal Reserve.

Spot gold rose 0.90% to $2,249.95 per ounce and was last trading at $2,251.23 per ounce, while gold futures for June contract gained 0.63% to $2,271.35 per ounce after reaching an intraday high of $2,286.35 before the US manufacturing data was published.

US Manufacturing Surprise Jump Dents Early Rate Cut Hopes

The yellow metal climbed to a record despite the US ISM manufacturing purchasing manager’s index (PMI) unexpectedly increasing to 50.3 in March from February’s reading of a 47.8 fall.

The upbeat data marked the first expansion in the sector since September 2022, diminishing the possibility of the Fed starting rate reductions as soon as June, which resulted in gains in Treasury yields and the greenback on Monday.

Due to a higher dollar, gold often costs more and loses its appeal to foreign investors, considering the yellow metal is priced in US dollars.

A Fed Rate Monitor Tool showed that the odds of a June rate cut are now 56%, down from 64% the week before.

Still, the solid manufacturing reading was compared to the core personal consumption expenditures (PCE) price index data, the central bank’s ideal inflation measure, which showed inflation retreating 2.8% year-over-year (YoY) in February from an upwardly revised 2.9% YoY growth in January.

The reading ended above analysts’ estimates, potentially deeming the recent unexpected increases in inflation an irregularity from the current deflation trend.

The demand for gold was also propelled by intensifying geopolitical tensions in the Middle East.

In the latest escalation of conflict in the region, Iran reported that Israel’s air strikes on a consular annex in Damascus, Syria, on Monday claimed the lives of seven military officers, including three senior commanders, with General Mohammadreza Zahedi of Iran’s elite Quds Force being one of the three.

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