Mar 7 2024: Gold Prices Reach New Peaks as Powell Suggests Rate Cut in 2024
On Thursday, gold prices soared to unprecedented levels, marking their seventh consecutive daily increase. This surge was propelled by weak U.S. economic data and indications from Federal Reserve Chair Jerome Powell hinting at potential rate cuts in the near future, should inflation ease.
As of 0432 GMT, spot gold rose by 0.5% to $2,159.79 per ounce, hitting an all-time high of $2,161.09 earlier in the session. Meanwhile, U.S. gold futures increased by 0.4% to $2,167.00.
Marcus Garvey, head of the commodities strategy team at Macquarie, observed that while slight weaknesses in U.S. data contributed to the gold rally, the magnitude of the movement appeared disproportionately large, possibly influenced by significant futures buying initiated on Friday.
Powell’s indication of potential interest rate cuts in the coming months, combined with further evidence of declining inflation, provided a significant boost to gold. Powell is scheduled to speak again later in the day.
Lower interest rates tend to enhance the appeal of non-yielding assets like gold.
The combination of Powell’s remarks and data showing a softening of labor market conditions led to a decline in U.S. Treasury yields and the dollar, thereby increasing the attractiveness of gold.
Looking ahead, Garvey suggested that if upcoming labor market data or next week’s inflation data indicates any weakness, the short-term target for gold could be $2,300 based on technical levels. However, he anticipates this surge to be short-lived before prices correct and consolidate.
Jigar Pandit, head of commodity and currency business at BNP Paribas’ Sharekhan, highlighted strong demand for gold primarily from China, Turkey, Russia, and Poland, driven by geopolitical uncertainty and a slowdown in China that is expected to keep global growth in check.
In other precious metals, spot silver rose by 0.4% to $24.25, while platinum fell by 0.1% to $906.82 per ounce, and palladium slipped by 0.8% to $1,033.44.
