Gold jumps above $2,200 an ounce for the first time with support from Dovish Powell

(Bloomberg) — Gold jumped above $2,200 an ounce for the first time after the Federal Reserve maintained its forecast for three interest rate cuts this year, suggesting it is unfazed by the recent rise in inflation.

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Gold rose as much as 1.6 percent to a record level of $2,220.89 an ounce in early trading, before trimming about half of those gains. It has been rising since mid-February, supported by long-term support including heightened geopolitical risks and buying by central banks, led by China. However, the rapid rise caught many seasoned market watchers by surprise, as there was no clear catalyst.

The rise was partly driven by expectations for looser monetary policy in the United States, which the Federal Reserve reiterated on Wednesday. Bank Chairman Jerome Powell continued to highlight that officials want to see more evidence of lower rates, but “it is still very likely in most people's eyes that we will achieve that confidence and there will be interest rate cuts.”

“What we saw last night was the green light for gold traders to come back,” said Chris Weston, head of research at Pepperstone Group Ltd. “As we have seen, they are tolerant that the strength of the labor market will not be an obstacle.”

Speculation about the timing of the Fed's long-awaited pivot may have provided the trigger for the recent gains, as data shows that traders increased their net long positions in gold last week by the most since 2019. The metal is expected to benefit further when US rates move closer to that. . In fact, interest rates have fallen, with bullion-backed ETFs looking more likely to increase their holdings, according to UBS Group AG.

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Read more: Chinese buying paves way for latest gold record

On the geopolitical front, there are a number of risks that enhance gold's appeal as a haven asset. Russia appears to have the upper hand in its war in Ukraine, the conflict between Israel and Hamas continues unabated and has changed the course of global shipping, while the US presidential elections at the end of the year may be of great importance to markets. .

Chinese purchases also helped support prices. In addition to the central bank, ordinary people are hoarding coins, gold bullion and jewelry to protect their wealth from the years-long real estate downturn and losses in the country's stock market.

The spot price of gold rose 0.8% to $2,202.82 per ounce by 12:04 pm in Singapore. The Bloomberg Dollar Spot Index fell 0.2%. The prices of silver, platinum and palladium rose.

–With assistance from Jack Ryan.

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