In Asian trade on Thursday, gold prices surged to a record high, mirroring a significant decline in the US dollar following the Federal Reserve’s decision to maintain interest rates and signal potential rate cuts later this year.
The dollar experienced a sharp 0.6% decline post the Fed meeting, lifting the broader commodity complex. Copper prices edged closer to 11-month highs, while other precious metals also saw gains.
Gold emerged as the standout performer, reaching new highs on expectations of forthcoming interest rate reductions. Spot gold soared by as much as 1.2% to hit a record peak of $2,222.14 per ounce, with gold futures expiring in April climbing over 2% to a record high of $2,224.80 per ounce. Despite some retracement by 22:27 ET (02:27 GMT), both instruments remained above the $2,200 level.
Ahead of the Fed meeting, gold and broader metal markets had been consolidating.
Fed Chair Jerome Powell acknowledged recent inflation stickiness but emphasized the underlying trend of easing inflation. Moreover, Fed officials projected a 75 basis point drop in interest rates by the end of 2024. This prospect is favorable for gold, particularly after rising interest rates had previously impacted the precious metal negatively.
Traders are now factoring in a 73.4% likelihood of the Fed’s first rate cut occurring as early as June, according to the CME Fedwatch tool.
However, the Fed also upgraded its 2024 outlook for the US economy significantly, now predicting growth of 2.1% compared to prior forecasts of 1.4%. This upward revision could potentially dampen safe-haven demand for gold amidst growing optimism about a soft landing for the US economy.
Other precious metals also witnessed substantial gains on Thursday, with platinum futures rising 0.9% to $920.0 an ounce, and silver futures surging 3.3% to $25.927 an ounce.
