Gold prices surged to a new all-time high on Monday, as the latest U.S. inflation data bolstered expectations that the Federal Reserve could deliver its first interest rate cut as early as June. The precious metal's rally has been fueled by a combination of factors, including geopolitical tensions, robust Chinese demand, and the prospect of monetary easing by major central banks.

Spot gold rose 1% to $2,254.71 per ounce after hitting a record high of $2,262.19 earlier in the session. U.S. gold futures climbed 1.7% to $2,275.60. The metal's ascent has been remarkable, with prices up more than 9% this year and reaching record highs in various currencies, including euros, yuan, Indian rupees, and the British pound sterling.

The latest boost to gold prices came after data released on Friday showed that U.S. inflation moderated in February, keeping the possibility of a June interest rate cut from the Fed on the table. Fed Chair Jerome Powell said February's inflation data was "more along the lines of what we want to see," further fueling rate cut expectations.

"The slightly lower than expected US inflation figure last Friday is supporting the outlook of a mid-year rate cut by the Fed," said UBS analyst Giovanni Staunovo. "Markets will now want to see if the payroll data will confirm a soft landing from job market in the U.S.. Ongoing solid demand is helping the yellow metal as well, although higher prices may weigh on jewellery demand."

In addition to the prospect of monetary easing, gold has benefited from safe-haven demand amid geopolitical tensions in the Middle East and Ukraine. Central bank purchases, particularly in China, have also underpinned the rally. Chinese consumers have been loading up on the metal amid ongoing problems in Asia's largest economy.

"Growing rate cut expectations, safe-haven demand and central bank purchases amid geopolitical tensions have boosted gold more than 9% this year," Staunovo noted.

However, some analysts caution that the current price action is happening in a low liquidity environment, with many European and Asia-Pacific markets closed for Easter Monday. "It would not be surprising to see these moves reverse when participation rebuilds later in the week," said Ilya Spivak, head of global macro at Tastylive.

Despite the impressive rally, gold's ascent has yet to strike a chord among investors who favor exposure to the metal through exchange-traded funds (ETFs). Worldwide holdings in bullion-backed ETFs shrank by more than 100 tons in the first quarter, hitting the lowest level since 2019 in mid-March, before a small uptick, according to a Bloomberg tally.

Looking ahead, investors will closely watch the upcoming U.S. payrolls data for further indications of the economy's health and the potential impact on Fed policy. Swaps markets are currently pricing in a 61% chance of a Fed rate cut in June, up from 57% on Thursday.

While gold's positive prospects have been endorsed by leading banks such as JPMorgan Chase & Co. and Goldman Sachs Group Inc., some analysts caution that a pullback in the short term is possible. "It wouldn't take much of a catalyst to see a pullback in the short term," said Warren Patterson, head of commodities strategy at ING Groep NV, adding that a stronger-than-expected U.S. jobs report could trigger such a reversal.

As the market awaits further economic data and central bank signals, gold's record-breaking rally serves as a testament to the metal's enduring appeal as a safe haven and hedge against inflation and geopolitical uncertainties. With the prospect of lower interest rates and ongoing demand from central banks and consumers, particularly in China, the precious metal's outlook remains bullish, though short-term volatility cannot be ruled out.