Gold rises above $2,200 an ounce for the first time on dovish Powell

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(Bloomberg) — Gold jumped above $2,200 an ounce for the first time after the Federal Reserve maintained its outlook for three rate cuts this year, showing it is not worried by the recent spike in inflation.

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Bullion rose as much as 1.6% to a record $2,220.89 an ounce in early trading, before that gain was almost halved. It has surged since mid-February, driven by long-standing support including increased geopolitical risk aversion and buying by central banks led by China. However, the rapid rise has taken many seasoned market observers by surprise, as there is no obvious catalyst.

The rally is partly driven by expectations of loose monetary policy in the US and the Fed confirmed this on Wednesday. Chairman Jerome Powell continued to emphasize that officials would like to see more evidence that prices are coming down, but “it is still possible in most people’s view that we will regain that confidence and have a rate cut, ” They said.

“What we saw last night was really a green signal for gold traders to come back,” said Chris Weston, head of research at Pepperstone Group Ltd. “The Fed has said they are tolerant of inflation right now.” “From what I see, they are tolerant that the strength of the labor market will not be a hindrance.”

Speculation about the timing of the Fed’s long-awaited pivot could provide the trigger for recent gains, data shows traders increased their net long positions on gold last week by the most since 2019. The metal will benefit even more if US interest increases as rates actually move lower, according to UBS Group AG, as the share of bullion-backed exchange traded funds is likely to increase.

Read more: Chinese buying sets the stage for gold’s latest record run

On the geopolitical front, there are several risks increasing the attractiveness of gold as a safe-haven asset. Russia appears to be gaining ground in its war in Ukraine, the Israel-Hamas conflict continues to rage and cause global shipping to be diverted, while the US presidential election at the end of the year will be massively consequential for markets. Can be proved. ,

Chinese buying has also strengthened the prices. Along with the central bank, regular people are hoarding coins, gold bars and jewelery to protect their assets from the years-long slide and losses in the country’s stock market.

Spot gold rose 0.8% to $2,202.82 an ounce by 12:04 pm in Singapore. The Bloomberg dollar spot index declined 0.2%. Silver, platinum and palladium were all higher.

–With assistance from Jack Ryan.

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