Gold prices climbed sharply on Monday as traders increased their bets that the US Federal Reserve will soon cut interest rates to counter a slowing economy.
Bullion jumped nearly 2% to above $4,070 an ounce, buoyed by weaker consumer sentiment data from the University of Michigan, which showed confidence slipping in November compared with October.
Money markets now see around a 65% chance of a Fed rate cut in the coming months, as signs of economic fatigue mount.
Neil Welsh, head of trading at Britannia Global Markets, said the move “reflects continued demand for hard assets even as broader sentiment stabilises on hopes the US shutdown will soon end and China’s deflationary pressures will ease somewhat.”
He added: “Overall, the tone in metals is constructive to start the week, with cautious optimism that recent macro headwinds are beginning to recede.”
Still, traders have slightly trimmed their bets on aggressive rate cuts amid expectations of a wave of economic data releases as the government shutdown draws to a close.
Gold remains about 7% below its record high of more than $4,300 an ounce reached last month.
