Due to the metal’s attractiveness as a safe haven asset and the likelihood of a U.S. interest rate decrease, gold prices continued to rise and reached a new record high on Monday.

Spot gold increased by 0.6% to $2,245.79 an ounce. The price of an ounce of U.S. gold futures increased by more than 1% to $2,266.39.

According to World Gold Council market strategist Joseph Cavatoni, “I think it’s a really exciting moment in gold,” he told CNBC on Monday. He stated, “I think a lot of market speculators are really getting that confidence and comfort [in] the Fed cuts,” which is what’s really driving it.

The U.S. Federal Reserve is anticipated by market observers to lower interest rates in June.

According to statistics released on Friday, the main Fed inflation indicator for February increased 2.8% year over year; this is expected to keep the U.S. central bank on hold until it can start thinking about cutting rates.

Following its most recent meeting in March, the Fed maintained its projection of three rate reductions this year while remaining unchanged on interest rates.

Interest rates and gold prices typically have an adverse connection. Compared to fixed income assets like bonds, which would produce lesser returns in a low interest rate environment, gold becomes more attractive when interest rates decline.

Demand from outside, according to Caesar Bryan, portfolio manager at investment management firm Gabelli Funds, also drove up the price of bullion.

“In China, private investors have been attracted to gold because the real estate sector has done poorly,” Bryan said, adding that China’s general economy has remained weak and its stock market and currency have not been performing well.

According to Cavatoni of the World Gold Council, the world’s central banks have been buying a lot of gold so far in an effort to diversify reserve portfolios in light of geopolitical threats, domestic inflation, and the weakening US dollar.

“Really strong case for them to continue to buy … [but] let’s see if they continue to be as large and for as long,” he added.

Based on data from the WGC, China is the main driver of central bank gold purchases as well as consumer demand.

(Adapted from TheStraitsTimes.com)