Another new high for gold ahead of US inflation data

Gold set a fresh record above $2,350 an ounce before paring gains, as investors shifted focus to a key US inflation reading later this week. 

Bullion rose as much as 1% as traders assessed where policymakers now stand on the timing of their pivot to lower borrowing costs, ahead of March inflation data Wednesday. The Federal Reserve expects to cut this year, but needs to see more evidence that inflation is easing first. Higher rates are typically negative for gold, which doesn’t pay interest.

The precious metal remains supported well above $2,300 after notching a series of fresh all-time highs in recent weeks. Yet, the move has left some onlookers puzzled amid a lack of any obvious trigger for the sudden rally that began in mid-February — especially as traders have unwound bets for steep rate cuts during that period.

Gold is up more than 18% since then, with at least some of the gains fueled by optimism that the Fed was getting closer to cutting rates. Central bank demand has also been a factor, with the People’s Bank of China reporting an addition for a 17th straight month in March.

Elsewhere, bullion has benefited from increased haven demand amid persistent tensions in the Middle East. Israel said Sunday the country is removing some troops from southern Gaza after Prime Minister Benjamin Netanyahu said victory was within reach. Iran is preparing a response to a suspected Israeli attack on its consulate in Syria, while Hezbollah warned that it’s ready for war.

UBS Group AG boosted its year-end gold outlook by 11% to $2,500 an ounce, with a revival in demand for bullion-backed exchange traded funds set to support another leg up when the Federal Reserve cuts rates around mid-year, according to a note from analysts including Giovanni Staunovo.

Spot gold was 0.3% higher at $2,336.28 an ounce as of 10:03 a.m. in London, after earlier touching a record $2,353.95. The Bloomberg Dollar Spot Index was 0.1% higher. Silver, platinum and palladium rose.

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