Gold prices rose another 0.5% on Monday, extending their impressive rally. The catalysts for the growth of the precious metal, considered as a safe haven asset, are the uncertainty surrounding the US presidential election, the escalation of geopolitical tensions in the Middle East, as well as the easing of monetary policy by world Central Banks.
The focus also turned to the news that the Central Bank of China lowered the interest rates on loans as part of a package of stimulus measures to revive the economy. Demand for gold in China, a key consumer of precious metals, has suffered amid high prices and slowing economic growth.
Meanwhile, investors expect the Fed to continue easing monetary policy. According to the CME FedWatch Tool, markets see a 90.4% probability of a 0.25% rate cut at the November meeting (compared to 83.6% a week earlier) and a 76.8% probability of a 0.25% rate cut in December (compared to 76.6% a week earlier). Lower rates generally enhance gold's allure, as bullion yields no interest.
Further growth in gold prices was limited by the strengthening of the US currency and the growth of yields on US Treasury bonds. The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, Canadian dollar, pound sterling and Swedish krona) rose by 0.45% to 103.62. The yield on 10-year US bonds increased by 2.0 basis points to 4.095%.