Gold prices are at yet another record high. That means rate cuts are coming soon

Gold isn't the only metal that's surged in recent days. Copper and silver have also seen sharp price increases.

• Gold reached a new record of $2,454.20 per ounce on Monday as markets price in Fed rate cuts.
• The consensus estimate on Wall Street right now is for two 25-basis-point reductions this year.
• The metal is leading a broader commodity that's seen copper and silver also hit new highs.

Gold set another record high on Monday as Wall Street readies for monetary policy to ease this year.

The yellow metal notched an intraday record of $2,454.20 per ounce. This upside momentum comes as investors grow open to the possibility of interest-rate cuts this year. Since gold is a non-interest-bearing asset, it typically outperforms when rates fall. 

Rate-cut sentiment shifted after April's cooler-than-expected consumer price index report, marking an upward inflection point in the price of gold, and putting March's worryingly hot inflation prints in the rear view.

Now, futures markets are back to expecting two 25-basis point cuts this year, starting in September.

In another sign of rate-cut optimism, risk appetite among investors jumped markedly this month. According to an S&P Global survey, it rose 28% in May, compared to just 5% in April. It now stands at its highest reading since late 2021.

But there are other geopolitical reasons to pile into gold, going beyond dovish expectations of rate decreases.

"The recent increases in the price of gold are largely driven by three factors: rising geopolitical tensions — including the unexpected death of Iran's president — the weakening of the dollar, and purchases by central banks," wrote Grzegorz Drozdz, a market analyst at Conotoxia. If negative surprises are avoided this year, he expects gold to possibly rally beyond $2,500 in 2024.

Given that gold is a safe haven asset, rising international face-offs have prompted more investors to buy the bullion. Meanwhile, US sanctions on Russian reserves sparked central banks to snap up the metal at record pace.   

The asset also benefits from a broader metal rally, with commodities such as copper to silver also breaching their own records. For instance, spot silver climbed past an 11-year high on Monday.

"Silver has made incredible gains over the past fortnight, and it does look overbought at current levels. That would suggest that some profit taking could come in now," said David Miarrions, senior market analyst at Trade Nation. "But traders would have to be very brave or foolhardy to short a market moving this way."