Gold prices rose to a new record high on Thursday as the US dollar and bond yields fell Gold prices rose to a new record high on Thursday as the US dollar and bond yields fell after the Federal Reserve maintained its forecast of three interest rate cuts this year. gold in spot transactions rose one percent to $2,208.30 per ounce, after hitting an all-time high of $2,222.39 earlier in the session. US gold futures jumped 2.3 percent to $2,211, according to Reuters.
Lower interest rates reduce the opportunity cost of holding non-yielding bullion and pressure the dollar, making gold cheaper for investors who hold other currencies. The Federal Reserve kept interest rates steady on Wednesday, but policymakers indicated they still expect to cut them by three-quarters of a percentage point by the end of 2024. Federal Reserve Chairman Jerome Powell said that the recent higher inflation rate readings did not change the basic “story” of the slow easing of US price pressures.
Financial markets analyst at Capital.com, Kyle Rodda, said that this is the moderate scenario for gold prices, where marginally high inflation expectations are offset by lower nominal rates to create low real returns. He added: “The (Federal Reserve) caution, slight pressure on existing short positions, and a little momentum chasing (an investment strategy that includes buying assets that are witnessing a rise in prices) have strengthened the upward trend in the gold market.”
Fed funds futures traders now place a 75 percent probability that the central bank will start cutting interest rates in June, up from 59 percent on Tuesday, according to the CME Group’s Fed Watch tool. ». Tim Waterer, chief market analyst at KCM Trade, said in a note: “With Powell maintaining three possible interest rate cuts this year, bond yields and the US dollar fell, which opened an upward path for the price of gold.”
The dollar fell to its lowest level in a week against competing currencies, while standard ten-year US Treasury bond yields also declined. Spot gold may retest resistance at $2,222 per ounce, and a break above that could lead to gains in the $2,228-$2,234 range, according to Reuters technical analyst Wang Tao. Silver gained 0.4 percent in spot transactions to $25.72 per ounce, platinum rose 0.6 percent to $912.50, and palladium rose 1 percent to $1,031.55.