Gold rallied towards a record as expectations for US Federal Reserve rate cuts grow and traders ramp up bets on a second Donald Trump presidency.

Spot bullion rose 0.8% to just below US$2,443 an ounce after increasing on Monday to within US$11 of the peak set in late May. Traders see two quarter-point rate reductions this year - a move that would traditionally benefit the non-interest bearing yellow metal - as inflation cools.

Gold is almost 20% higher for the year, supported by anticipation of Fed rate cuts, as well as significant buying by central banks. Ongoing geopolitical tensions have also supported the precious metal, which is traditionally seen as a safe-haven asset.

“Optimism about US interest rate cuts as more economic data supports the case for a Fed pivot is supporting gold,” said Ewa Manthey, a commodities strategist at ING Bank NV. “Gold is poised to keep its positive momentum going amid the current global geopolitical and macroeconomic landscape, while central bank demand is expected to grow.”

On Monday, Fed chair Jerome Powell said recent data had given policymakers greater confidence that inflation is heading down to the central bank’s 2% goal.

Traders have been adding bets there will be three cuts this year after Goldman Sachs Group Inc said conditions were ripe for easing, with “a solid rationale” for officials to lower rates as soon as July.

Meanwhile, Trump’s candidacy gained momentum after a failed assassination attempt over the weekend and a judge dismissed a criminal case against him. The Dow Jones Industrial Average hit an all time high on Monday, while Trump Media & Technology Group Corp and Conservative video-sharing platform Rumble Inc both jumped.

A Trump presidency may have both positive and negative impacts on gold, said Giovanni Staunovo, a commodity analyst at UBS Group AG. It may lead to “tax cuts, supporting a shift to equities, and eventually limiting faster rate cuts,” he said.

On the other hand, tax cuts would deteriorate US fiscal balances, potentially weakening the dollar’s status and pushing buyers toward safe-haven assets such as gold, he said.

Spot gold rose to US$2,442.57 an ounce by 10.48am in London. The Bloomberg Dollar Spot Index edged higher, while US 10-year Treasury yields slipped.

Silver was steady, while platinum and palladium fell.

  - Bloomberg