Gold prices continued their gains and hit new record highs on Monday, boosted by expectations of a cut in US interest rates and the metal's appeal as a hedge asset.
Spot-traded gold added 0.6% to trade at $2,245.79. The US gold contract rose more than 1% to trade at $2,266.39.
According to Joseph Cavatoni, market strategist at the World Gold Council, many market speculators are optimistic about the Fed's interest rate cuts.
Market analysts expect the US Federal Reserve to cut interest rates in June.
The Fed's headline inflation index for February rose 2.8% year-on-year, based on data released last Friday with the US central bank likely to keep rates on hold before it could start considering a rate cut.
The price of gold tends to react inversely with interest rates. When interest rates fall, gold becomes more attractive compared to fixed income assets such as bonds, which will provide lower returns in a low interest rate environment.
According to Caesar Bryan, portfolio manager at investment management company Gabelli Funds, bullion prices are also driven by overseas demand.
"In China, private investors are attracted to gold because the real estate sector is not doing well," Bryan said, adding that China's general economy has remained weak and its stock market and currency have not performed well.
Gold's surge so far has been driven by strong purchases from global central banks in an effort to create a diverse portfolio of reserves due to geopolitical risks, domestic inflation, and the weakness of the US dollar, said Cavatoni of the World Gold Council.
China is the main driver of both consumer demand and gold purchases by central banks, based on data from the WGC.
