Wednesday, April 3, 2024

Gold plows to record high after Powell's remarks

 Gold prices extended a record run on Wednesday as concerns of rising inflation boosted demand for gold as a hedge, with bullion traders shrugging off doubts over an imminent U.S. interest rate cut and rising Treasury yields.

Gold prices raced to a record high yet again on Wednesday, after Federal Reserve Chair Jerome Powell reiterated that recent readings on job gains and higher-than-expected inflation do not materially change the overall picture of economic policy this year.

Spot gold rose 0.5% to $2,292.31 per ounce after hitting a record high of $2,294.99 earlier in the session.

U.S. gold futures settled 1.5% higher at $2,315.

"Gold surged to yet another historic high on elevated trading volume after Powell stresses that 'bumps' in the road don't change the overall rosy picture," said Tai Wong, a New York-based independent metals trader.

"Powell's customary cautious approach doesn't worry gold bulls...I think bulls want to see $2,300 and I think more 'tourists' are getting involved in the trade."

Powell said that "if the economy evolves broadly as we expect," he and his Fed colleagues largely agree that a lower policy interest rate will be appropriate "at some point this year."

Investors still expect a first rate cut at the Fed's June 11-12 policy meeting, even as stronger recent economic data has sown investor doubts about that outcome.

Gold, a hedge against inflation and a safe haven during times of political and economic uncertainty, has climbed over 11% so far this year, helped by strong central bank buying and safe-haven demand.

The U.S. jobs report for March is due to be released on Friday, with new inflation data coming next week.

A pair of Federal Reserve policymakers said on Tuesday they think it would be "reasonable" to cut U.S. interest rates three times this year.

"The likelihood of rate cuts is still there, but the data is still really strong. This is an election year, so I don't think the Fed will want to be held accountable for any kind of market crash," said Daniel Pavilonis, senior market strategist at RJO Futures.

Silver rose 3.1% to $26.92 per ounce and was trading at its highest level in over two years.

Platinum was up 1.7% at $931.13, and palladium gained 1.2% to $1,015.70.

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