In a historic milestone, the price of gold surged past $2,200 per ounce for the first time on Thursday. This remarkable ascent came following the US Federal Reserve’s announcement of its intention to proceed with three rate cuts in 2024, despite persistent inflationary pressures.
During the early hours of trading, spot gold reached a new pinnacle at $2,222.39, subsequently retreating to $2,206.10 by 9:05 a.m. EDT, marking a 1.0% gain. Meanwhile, US gold futures soared by 2.4% to reach $2,208.20.
The recent rally in gold, which commenced in mid-February, has been bolstered by enduring factors such as heightened geopolitical tensions and increased purchases by central banks. Notably, within this month alone, the precious metal has achieved new highs on five separate occasions.
Market analysts, including those at Bloomberg, have expressed surprise at gold’s rapid ascent, citing a lack of clear catalysts. However, expectations of looser monetary policy in the US have played a significant role in driving bullion prices, a sentiment reaffirmed by the Federal Reserve.
Federal Reserve Chair Jerome Powell reiterated on Wednesday the central bank’s stance of requiring further evidence of inflationary pressures subsiding before considering rate adjustments. Despite this cautious approach, Powell affirmed the likelihood of rate cuts in the foreseeable future.
Chris Weston, head of research for Pepperstone Group, remarked, “What we saw last night was the green light really for gold traders to come back in.” He pointed to the Federal Reserve’s tolerance towards prevailing inflationary trends and labor market conditions as key drivers for gold’s resurgence.
Speculation surrounding the timing of the Federal Reserve’s anticipated pivot may have served as a catalyst for recent gains, with data indicating a notable increase in traders’ net long positions on gold in the week through March 5, the most significant surge since 2019.
According to UBS Group, gold stands to benefit further once US interest rates begin to decline, as bullion-backed exchange-traded funds are anticipated to increase their holdings.
On the geopolitical front, several risk factors have contributed to gold’s allure as a safe-haven asset. Ongoing conflicts, including Russia’s actions in Ukraine and the Israel-Hamas dispute, alongside potential market volatility surrounding the upcoming US presidential election, have underscored gold’s appeal.
Moreover, robust demand from China, both from the central bank and individual investors seeking to safeguard their wealth amid economic uncertainties, has provided additional support to gold prices. Purchases of coins, gold bars, and jewelry have surged amidst a prolonged property downturn and stock market losses in the country.
