Gold hits record high on bets for March start to Fed rate cuts

An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File Photo Acquire Licensing Rights

Gold up over 3% so far for the weekFed to move ‘carefully’ on interest ratesSilver hits six-month high

Dec 1 (Reuters) – Gold prices rallied to an all-time high on Friday after remarks from Federal Reserve Chair Jerome Powell increased traders’ confidence the U.S. central bank had completed its monetary policy tightening and could cut rates starting March.

Spot gold climbed 1.6% to $2,069.10 per ounce by 3:30 p.m. ET (2030 GMT). Prices were 3.4% higher so far this week, and earlier rose to $2,075.09 per ounce to beat the previous all-time high of $2,072.49 scaled in 2020.

U.S. gold futures also settled 1.6% higher at a record peak of $2,089.7.

Reuters Graphics
Reuters Graphics

Powell said “the risks of under- and over-tightening are becoming more balanced,” but the Fed is not thinking about lowering rates right now.

“Gold bulls are focusing on Powell’s comment that rate is well into restrictive territory which plays into the narrative that cuts will come sooner, pointedly ignoring his warning that it was premature to speculate on easing rates,” Tai Wong, a New York-based independent metals trader.

Markets added to bets of a March start to rate cuts and an interest rate of under 4% by the end of next year.

Lower interest rates reduce the opportunity cost of holding zero-yield gold.

But, “prices may have entered overbought territory and gold has been known to price in monetary policy expectations prematurely over the past two years,” Standard Chartered analyst Suki Cooper said in a note.

Boosting bullion’s appeal, benchmark 10-year Treasury yields slipped to a 12-week low and the dollar (.DXY) ticked 0.3% lower.

“Gold has had a Santa Claus rally and I expect that to continue until the end of this year. It is certainly within the realm of possibility that gold re-tests record highs,” said Everett Millman, chief market analyst at Gainesville Coins.

Silver gained 0.9% to a more than six-month high at $25.47 per ounce, set for a third consecutive weekly rise.

Platinum rose 0.6% to $932.44 and palladium lost 0.3% to $1,004.92.

Reporting by Anushree Mukherjee, Ashitha Shivaprasad and Deep Vakil in Bengaluru; Editing by Elaine Hardcastle, Barbara Lewis and Shailesh Kuber

Our Standards: The Thomson Reuters Trust Principles.

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Reports on global commodities and energy markets, with a special focus on oil and gas infrastructure and the power sector. Alongside agriculture, metals, and dry bulk, his coverage also spans U.S. energy regulations, extreme weather events, and the transition to renewables. Contact: 917483271897

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