Gold drove higher to a fresh record above US$2,350 an ounce as investors shifted focus to a key US inflation reading later this week, while geopolitical risks also added to its appeal. 

Bullion rose as much as 1 per cent – reversing an earlier loss – as traders assessed where policymakers now stand on the timing of their pivot to lower borrowing costs, ahead of March inflation data on Wednesday (Mar 10). 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 US$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 which began in mid-February – especially as traders have unwound bets on steep rate cuts during that period.

Gold is up more than 18 per cent since then, with at least some of the gains fuelled 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 benefitted from increased haven demand amid persistent tensions in the Middle East. Israel said on 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.

Spot gold was 0.2 per cent higher at US$2,335.38 an ounce as of 1.41 pm in Singapore, after earlier touching a record US$2,353.95. The Bloomberg Dollar Spot Index was little changed. Silver rose, while platinum and palladium were mixed. BLOOMBERG

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