Gold prices surged to a new record high in Asian trading on Thursday, largely propelled by remarks made by Federal Reserve Chair Jerome Powell indicating potential interest rate cuts in 2024.
The precious metal continued its robust rally from the previous week, riding on increasing optimism surrounding anticipated U.S. interest rate reductions. Traders maintained their positions, speculating that the central bank could initiate rate cuts as early as June.
Spot gold soared by over 0.4% to reach a historic peak of $2,161.19 per ounce, while gold futures set to expire in April climbed to a pinnacle of $2,168.10 per ounce.
ANZ analysts emphasized that the recent upsurge in gold prices has been bolstered by heightened investor demand. This demand surge has been fueled by the anticipation of lower interest rates, coupled with significant safe-haven buying amid elevated geopolitical tensions and an uncertain economic landscape.
Powell touts rate cuts, but Kashkari offers more cautious outlook
In his recent testimony, Powell confirmed the Fed’s intention to implement interest rate cuts in 2024, a scenario favorable for assets like gold that do not yield interest.
However, Powell provided limited clues regarding the timing and magnitude of these anticipated cuts, emphasizing that the trajectory of the U.S. economy and inflation would dictate any monetary policy adjustments. Additionally, Powell expressed the need for more convincing evidence that inflation was progressing toward the Fed’s target of 2% annually.
Minneapolis Fed President Neel Kashkari echoed Powell’s sentiments, suggesting that he foresees no more than two, or possibly just one rate cut this year. Kashkari cited concerns about persistent inflation, a sentiment shared by several other Fed officials in recent weeks.
Although the dollar experienced a significant decline during overnight trading, it rebounded modestly during the Asian session, particularly following Kashkari’s remarks.
Meanwhile, gold prices retreated from their intraday highs by 23:33 ET (04:33 GMT). The prospect of prolonged higher interest rates has tempered gold’s attempts to reach record highs over the past year.
In contrast, other precious metals displayed subdued movements in Asian trade, with platinum futures stabilizing around $913.80 per ounce and silver futures experiencing a slight decline to $24.477 per ounce.
Focus is now squarely on key nonfarm payrolls data due on Friday, for more cues on the labor market, which is also a key consideration for the Fed in adjusting rates.
Copper buoyed by positive Chinese data
Copper futures gained 0.3% to reach $3.8817 per pound among industrial metals, largely supported by robust trade data from China.
China, the largest importer of copper globally, reported a trade surplus exceeding expectations for the initial two months of 2024, primarily due to a significant surge in exports.
Of particular significance for copper was the substantial uptick in Chinese imports, surpassing expectations. Specifically, imports of the red metal in China increased by 2.6% year-on-year during the January to February period, indicating ongoing demand despite relatively subdued business activity.