Gold extends rally to record peak
Fed hints at rate cut
Lower interest rates boost the appeal of non-yielding bullion.
Harshit Verma
Gold prices surged to a record high yesterday, poised for their seventh consecutive daily rise, led by sluggish US economic data and Federal Reserve Chair Jerome Powell’s indications of potential rate cuts in the coming months should inflation alleviate.
Spot gold rose 0.3% to US$2 155.42 per ounce, as of 0723 GMT. US gold futures added 0.2% to US$2 163.10.
Bullion continued its record-breaking rally, reaching an all-time high of US$2 161.09 earlier in the session and looked set for its longest intra-day winning streak since at least November 2021.
The marginal weakness in US data gave gold a reason to rally, yet the magnitude of movement appears disproportionately large, possibly influenced by large futures buying that commenced last Friday, Marcus Garvey, head of commodities strategy team at Macquarie, said.
Monetary policy
Gold got a boost on Wednesday after Powell indicated that interest rate cuts were likely in the coming months “if the economy evolves broadly as expected,” along with further evidence of falling inflation.
Lower rates boost the appeal of non-yielding bullion.
Powell’s remarks, coupled with data released the same day indicating a softening of labour market conditions, resulted in US Treasury yields and US dollar sliding, increasing the appeal of gold.
If today’s labour market data or next week’s inflation data shows any weakness, US$2 300 would be the short term target based on technical levels, but that would be fairly a short lived phenomenon, before prices correct and consolidate, Macquarie’s Garvey said.
“We expect central bank buying to continue on the back of geo-political uncertainty. Slowdown in China will keep global growth contained. Hence, in an uncertain financial environment, gold will remain safe investment for banks,” said Jigar Pandit, head of commodity and currency business at BNP Paribas’ Sharekhan.
- Reuters
Gold prices surged to a record high yesterday, poised for their seventh consecutive daily rise, led by sluggish US economic data and Federal Reserve Chair Jerome Powell’s indications of potential rate cuts in the coming months should inflation alleviate.
Spot gold rose 0.3% to US$2 155.42 per ounce, as of 0723 GMT. US gold futures added 0.2% to US$2 163.10.
Bullion continued its record-breaking rally, reaching an all-time high of US$2 161.09 earlier in the session and looked set for its longest intra-day winning streak since at least November 2021.
The marginal weakness in US data gave gold a reason to rally, yet the magnitude of movement appears disproportionately large, possibly influenced by large futures buying that commenced last Friday, Marcus Garvey, head of commodities strategy team at Macquarie, said.
Monetary policy
Gold got a boost on Wednesday after Powell indicated that interest rate cuts were likely in the coming months “if the economy evolves broadly as expected,” along with further evidence of falling inflation.
Lower rates boost the appeal of non-yielding bullion.
Powell’s remarks, coupled with data released the same day indicating a softening of labour market conditions, resulted in US Treasury yields and US dollar sliding, increasing the appeal of gold.
If today’s labour market data or next week’s inflation data shows any weakness, US$2 300 would be the short term target based on technical levels, but that would be fairly a short lived phenomenon, before prices correct and consolidate, Macquarie’s Garvey said.
“We expect central bank buying to continue on the back of geo-political uncertainty. Slowdown in China will keep global growth contained. Hence, in an uncertain financial environment, gold will remain safe investment for banks,” said Jigar Pandit, head of commodity and currency business at BNP Paribas’ Sharekhan.
- Reuters
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