Gold prices surged past the $2,200 mark for the first time on Thursday following the US Federal Reserve’s announcement of its intention to proceed with three rate cuts in 2024, despite persistent inflation concerns.
During early trading hours, spot gold reached a new record of $2,222.39 before retracing slightly to $2,206.10 by 9:05 a.m. EDT, representing a 1.0% gain. Meanwhile, US gold futures soared by 2.4% to $2,208.20.
The recent rally in gold prices, which commenced in mid-February, is supported by ongoing factors such as heightened geopolitical tensions and increased central bank acquisitions. Throughout this month, the precious metal has reached new highs on five separate occasions.
Market analysts, cited by Bloomberg, have noted the surprising swiftness of gold’s ascent, particularly given the absence of a clear catalyst. However, expectations of a more accommodative monetary policy in the US, reaffirmed by the Fed’s recent statements, have contributed to bolstering bullion prices.
Federal Reserve Chair Jerome Powell reiterated on Wednesday the central bank’s stance, emphasizing their willingness to tolerate elevated inflation levels while expressing confidence in the eventual effectiveness of rate cuts.
Chris Weston, head of research for Pepperstone Group, interpreted the Fed’s message as a signal for gold traders to reenter the market, noting the central bank’s acceptance of current inflationary pressures and labor market dynamics.
Speculation surrounding the timing of the Fed’s anticipated policy shift may have spurred recent gains, with data indicating a significant increase in traders’ net long positions on gold.
UBS Group predicts that gold stands to benefit further once US interest rates begin to decline, anticipating an uptick in holdings by bullion-backed exchange-traded funds.
On the geopolitical front, various factors continue to elevate gold’s appeal as a safe-haven asset. Developments such as Russia’s advances in Ukraine, ongoing conflicts like the Israel-Hamas dispute, disruptions in global shipping routes, and the upcoming US presidential election contribute to heightened investor uncertainty.
Additionally, Chinese demand remains robust, with both the central bank and individual investors seeking to hedge against economic uncertainties through purchases of gold coins, bars, and jewelry amid property market downturns and stock market volatility.
