Gold prices are on track for their largest weekly increase in five months, nearing historic highs, driven by Federal Reserve Chair Jerome Powell’s remarks solidifying expectations of mid-year interest rate cuts. Spot gold remained steady at $2,157.32 per ounce, close to the record peak of $2,164.09 reached on Thursday.
U.S. gold futures also showed minimal movement, hovering around $2,164.60.
Nikos Kavalis, managing director at Metals Focus, noted that while short-term speculative activity contributed to the recent gold rally, the underlying driver is the anticipation of interest rate cuts in the near future. Powell’s comments suggesting that rate cuts are imminent have strengthened this expectation.
Traders are currently pricing in the likelihood of three to four quarter-point rate cuts, with a 75% probability of the first cut occurring in June, according to LSEG’s interest rate probability app. Lower interest rates make non-yielding assets like gold more attractive to investors.
Additionally, the recent rally in procyclical asset classes, particularly equities, has fueled demand for gold as investors seek to diversify their risk exposure.
While the surge in gold prices may impact consumption during the wedding season in India, demand from China, a key buyer, is expected to remain robust due to safe-haven demand.
The weakening dollar, set for its most significant weekly decline of the year, has made gold more affordable for holders of other currencies.
Investor attention is focused on the upcoming U.S. jobs data scheduled for release later in the day.
Other precious metals also saw movement, with spot platinum declining slightly to $916.48 per ounce, silver holding steady at $24.32, and palladium edging up to $1,039.07 per ounce. All three metals are poised for weekly gains.