Gold glitters amid rate cut hopes

US stock futures saw an uptick and gold prices surged to unprecedented heights, fueled by anticipations of a Federal Reserve interest rate reduction following recent data indicating a deceleration in inflation. S&P 500 futures rose by 0.4%, while major markets across Europe, Australia, and Hong Kong remained closed for the Easter break. In the technology sector, notable companies showed pre-market gains, hinting at a robust opening for tech stocks. Meanwhile, gold's price soared to over $2,265 per ounce, a 1.6% increase from Thursday, with the dollar index showing a slight decline. Contrarily, Bitcoin experienced a drop, falling below the $70,000 mark.

Inflation and consumer spending

The slowing pace of the Fed’s favored inflation measure in March, combined with a rebound in consumer spending, suggests the continuation of the optimistic market sentiment that has propelled stock indices to record highs this year. The core personal consumption expenditures price index, excluding food and energy, rose by 0.3% from the previous month, a deceleration from January's unexpected spike.

Drivers behind Gold’s rally

Gold has enjoyed a 14% rise since mid-February, driven by several factors including the anticipation of monetary easing by key global central banks, heightened geopolitical tensions in the Middle East and Ukraine, significant purchases by central banks (notably China), and robust consumer demand within China amidst ongoing economic challenges.

Post-inflation data, Fed Chair Jerome Powell remarked that the figures aligned with expectations, indicating no immediate need for rate adjustments. However, upcoming US economic indicators and policy direction insights, particularly with the anticipated continued job growth, will be closely monitored by investors. Current market swaps forecast a 61% probability of a Fed rate cut by June, up from 57% pre-data release. Gold, which does not yield interest, typically benefits from lower interest rate environments.