(Bloomberg) — Gold rose to a record high, supported by slowing U.S. economic data and comments from Federal Reserve officials that raised expectations of rate cuts early next year.
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The precious metal rose 3.1% to $2,135.02 an ounce in early trading Monday. This exceeded the historic peak reached on August 7, 2020, in the midst of the pandemic.
Fed Chairman Jerome Powell tried to meet growing investor expectations for an interest rate cut in the first half of 2024, but Wall Street responded by doubling down on Friday, despite his warning that “it would be “It is premature to confidently conclude that we have adopted a sufficiently restrictive stance, or to speculate on when the policy might be relaxed.” Swaps markets are now pricing in a decline in May. Bullion futures on the Comex hit a new record high after Powell’s comments.
Gold has rebounded strongly from the late September plunge, when it came under pressure due to expectations of higher long-term interest rates, which is negative for the non-interest-bearing metal. Prices began to rebound after the start of the conflict between Israel and Hamas in early October, which triggered a wave of safe-haven buying.
Bullion has since been supported by the decline in the dollar and US Treasury yields, with US data pointing to a slowing economy, reinforcing expectations of a rapid transition to rate cuts by the Fed. next year.
Gold still trades at a significant premium to price patterns based on its historical relationship with the greenback and Treasuries. That dynamic persisted for most of last year, driven by record central bank buying, which helped prices resist persistent outflows from gold-backed exchange-traded funds.
However, ETF holdings have shown signs of stabilization in recent weeks, which has helped ease selling pressure on the metal.
Gold rose 3% to $2,135.02 an ounce as of 7:53 a.m. in Singapore. The Bloomberg Dollar Spot Index fell 0.1%. Silver and platinum rose, while palladium fell.
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