Gold prices are on track for their most substantial weekly increase in five months, approaching historic highs, following remarks from Federal Reserve Chair Jerome Powell that solidified expectations of a mid-year interest rate cut. Spot gold remained flat at $2,157.32 per ounce, hovering near the record peak of $2,164.09 achieved on Thursday.
U.S. gold futures also maintained stability at $2,164.60, reflecting the impact of Powell’s comments on rate cut speculation. Powell emphasized that the Fed is nearing the confidence required for rate cuts, likely to be implemented in the coming months.
Traders are currently pricing in the probability of three to four quarter-point (25 bps) U.S. rate cuts, with a 75% chance of the first cut occurring in June, according to LSEG’s interest rate probability app. Lower interest rates enhance the attractiveness of gold, a non-yielding asset.
The recent surge in gold prices is not only fueled by short-term speculative activity but is primarily driven by expectations of imminent interest rate cuts. This surge has been supported by a rally in procyclical asset classes, particularly equities, as investors seek to diversify their risk exposure.
While the surge in gold prices may impact consumption during the wedding season in India, China, the top buyer, is expected to witness robust safe-haven demand this year. The weakening dollar, heading for its most significant weekly decline of the year, has further contributed to the strength of gold prices.
Market attention is now focused on the upcoming U.S. jobs data, with the key report scheduled for release at 1330 GMT. Other precious metals, including platinum, silver, and palladium, displayed varied movements but were poised for weekly gains.
