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Gold Trims Gains as Traders Book Profit After New Record
(Bloomberg) — Gold pared gains as traders booked profits after prices hit a record on growing optimism over the Federal Reserve’s monetary policy and rising geopolitical tensions in the Middle East.
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Gold rose slightly in early New York trading on Monday, having jumped 1.4% to $2,450.07, surpassing the previous intraday high reached in April.
The metal has slowed its surge in profit-taking, but the outlook remains positive and “new records could be on the way,” said Fawad Razaqzada, market analyst at City Index.
Traders have been increasing bets in recent sessions that the Fed could reduce borrowing costs as early as September, a scenario that would bolster gold as it does not pay interest.
A weaker dollar provided additional support to the precious metal. Recent economic data releases have indicated that the US economic recovery is slowing, which could reduce inflation and reduce the need for prolonged tight monetary policy, according to Razaqzada.
Broader macroeconomic drivers are also at play for precious metals and other raw materials such as copper. “China’s various stimulus measures have reinforced demand or the perception of demand for raw materials, and we have seen improvements in data from the eurozone and the UK,” Razaqzada said.
Gold’s safe-haven status was in the spotlight following news that Iran’s President Ebrahim Raisi, widely seen as a candidate to become the country’s next supreme leader, died in a helicopter crash on Sunday. His death, along with that of Foreign Minister Hossein Amirabdollahian, occurred at a time of turmoil in the Middle East due to the Gaza war. The incident adds to a sense of rising geopolitical risks across the region, after an oil tanker bound for China was hit by a Houthi missile in the Red Sea on Saturday.
Hedge funds that trade Comex futures drove bullish bets on gold to a three-week high in the week ended May 14, according to data from the Commodity Futures Trading Commission.
The gains suggest that gold has broken out of what has been a fairly narrow trading range in recent weeks amid a lack of clarity over the path of US rates. Prices are about 17% higher this year.
Gold’s strength has been linked to central bank purchases, robust demand from Asia – especially China – and heightened geopolitical tensions in Ukraine and the Middle East.
The story continues
Spot gold rose 0.1% to $2,417.51 an ounce at 10:13 a.m. in New York. Silver, meanwhile, rose slightly after previously rising to its highest level since December 2012.
Read more: Hot commodity silver outperforms gold as buying gains momentum
Silver’s strong rally on Friday was helped by rebounding sentiment in broader physical metals markets, where tight supply spurred investor demand for materials such as copper. Unlike gold, the white metal is also considered an industrial commodity due to its use in products such as solar panels. Palladium rose, while platinum fell.
–With assistance from William Clowes and Sybilla Gross.
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