Gold prices sprint to all-time peak on Fed rate-cut bets
File photo of gold bullion bars. (Photo: AFP/David Gray)
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Gold prices bolted to an all-time high above US$2,100 per ounce on Monday (Dec 4) as Federal Reserve Chair Jerome Powell's remarks elevated traders' confidence that the US central bank could cut interest rates early next year.
Lower interest rates reduce the opportunity cost of holding a non-interest-bearing bullion.
Spot gold was up 0.8 per cent at US$2,087.69 per ounce by 5.20am GMT. Earlier in the session, bullion surged to an all-time high of US$2,111.39.
US gold futures rose nearly 1 per cent to US$2,107.50.
Gold last hit a record US$2,075.47 an ounce in August 2020 when the pandemic boosted haven demand. This time around, its rise has been driven by geopolitical risk and traders aggressively pricing in rate cuts from March next year.
Bullion has rallied almost 16 per cent since early October, a surge that was initially sparked at the start of the Israel-Hamas conflict, but has since been driven by bets that the Federal Reserve will shift to monetary loosening early next year.
Powell last week said the central bank’s policy rate is “well into restrictive territory” in comments that are being interpreted as largely dovish by markets. Lower borrowing costs are typically positive for non-interest bearing bullion.
In India, the second-biggest consumer of gold after China, the metal has hit a fresh high in the local currency in November.
"After his (Powell) speech, traders were more convinced that we're currently at the peak of the US interest rates and therefore that the path forward from here is more likely to be down rather than up," said KCM Trade chief market analyst Tim Waterer.
"Liquidity does tend to exacerbate some moves in the market ... and also still there are safe-haven buying elements there as well," Waterer said.
Powell on Friday said "the risks of under- and over-tightening are becoming more balanced", but the Fed is not thinking about lowering rates right now.
Traders are now pricing in a 70 per cent chance for a rate cut by the US central bank by next March, CME's FedWatch Tool showed.
The market viewed his comments as dovish, sending the dollar index and 10-year Treasury yields lower on Friday, making gold more attractive for other currency holders.
Backing market sentiment, data last week pointed out to cooling inflationary pressures, a gradually easing labour market, with Fed Governor Christopher Waller flagging a possible rate cut if inflation continues to decline.
Investor focus now shift to US non-farm payrolls data - a key employment report due on Friday, that could influence the outlook for US interest rates.
Spot silver edged 0.1 per cent higher to US$25.45 per ounce, palladium fell 0.5 per cent to US$929.10 per ounce, and platinum was down 0.4 per cent at US$996.04.
