Gold has soared to unprecedented heights, reaching new peaks as speculations of an imminent rate cut gain momentum. The surge, initially triggered by the Israel-Hamas conflict, has seen bullion climb by over $300.
Analysts attribute this rally to geopolitical risks, with James Steel from HSBC emphasizing gold’s status as a primary safe-haven asset.
Despite concerns about the impact on consumption during the Indian wedding season, China emerges as a potential stronghold for safe-haven demand. Central banks’ robust gold purchases further contribute to the upward trajectory. World Gold Council market strategist Joseph Cavatoni notes the prevailing expectation of rate cuts as a driving force behind the surge.
Traders are now pricing in a 72% chance of a June rate cut, up from 63% at the end of February, according to the CME’s Fedwatch Tool. A potential rate cut would reduce the opportunity cost of holding gold in a low-interest-rate environment, concurrently weighing on the dollar and making bullion more affordable for overseas buyers.
As of 12:18 p.m. ET, spot gold sits at $2,157.89 per ounce, marking a 0.5% increase, with an all-time high of $2,164.09 achieved during Asian trading hours. U.S. gold futures also rose by 0.3% to $2,165.30.
Federal Reserve Chair Jerome Powell indicated that the Fed is “not far” from gaining enough confidence in inflation heading toward the 2% goal, potentially paving the way for interest-rate cuts. Eyes are now on Friday’s U.S. non-farm payrolls report for further market direction.
Despite gold’s rally, it’s noteworthy that riskier assets have also seen an upswing. Silver increased by 1% to $24.40, while platinum climbed 1.4% to $919.85 per ounce. Palladium, which experienced a significant surge on Wednesday, slipped 0.1% to $1,040.76.
In this complex economic landscape, gold’s remarkable ascent continues to be influenced by a combination of geopolitical uncertainties, central bank actions, and market expectations regarding interest-rate adjustments. The intricate interplay of these factors shapes the trajectory of the precious metal, impacting global markets and investor sentiment.
