In Thursday’s early trading, gold prices surged to a historic high of Rs 66,778 per 10 grams on the Multi Commodity Exchange (MCX) futures for April 2024 expiry. This remarkable increase came after the US Federal Reserve’s decision to maintain interest rates steady at 5.25-5.5 percent.
Spot gold prices also soared to a record high as the US dollar and bond yields dipped following Fed Chair Jerome Powell’s confirmation of three anticipated rate cuts for the year. Lower interest rates diminish the opportunity cost of holding non-yielding bullion, thus weighing on the dollar.
Spot gold witnessed a 2.07 percent increase, reaching $2,205.80 per ounce after hitting an all-time high of $2,222.39 earlier in the session. Meanwhile, silver advanced by 2.83 percent to $25,815 per ounce.
Financial market analyst Kyle Rodda described the current market conditions as a “goldilocks scenario” for gold prices, where slightly higher inflation expectations coincide with lower nominal rates, resulting in decreased real yields. He also noted that a dovish Fed, along with some short squeeze and momentum chasing, has bolstered bullish sentiment in the gold market.
Tim Waterer, chief market analyst at KCM Trade, attributed the surge in gold prices to Powell’s commitment to keeping three potential rate cuts on the table for this year. This decision caused bond yields and the US dollar to decline, creating an upward pathway for gold prices.
The dollar slipped to a one-week low against its rivals, with the dollar index trading 0.11 percent lower at 102.90. Additionally, benchmark US 10-year Treasury yields experienced a dip in response to the Fed’s decision.
