Gold prices reached unprecedented levels during Asian trading on Thursday, following a significant decline in the dollar subsequent to the Federal Reserve’s decision to maintain interest rates and indicate ongoing consideration for rate cut throughout the year.
Following the Fed’s meeting, the dollar experienced a 0.6% decline, bolstering the overall commodity market. Copper prices approached their highest levels in eleven months, alongside increases in other precious metal prices.
Among these, gold stood out as a top performer, achieving new highs due to anticipation of forthcoming interest rate reductions. Spot gold surged by up to 1.2%, reaching a peak of $2,222.14 per ounce, while gold futures expiring in April soared by over 2% to hit a record high of $2,224.80 per ounce. Both instruments experienced slight pullbacks but remained above the $2,200 threshold.
Prior to the Fed meeting, both gold and broader metal markets had undergone some consolidation.
Fed sustains rate cut expectations, June speculation increases
Fed Chair Jerome Powell acknowledged some recent persistence in inflation but maintained that the fundamental trend towards easing inflation remained unchanged. This was complemented by Fed officials’ projection of a 75 basis point reduction in interest rates by the end of 2024.
This forecast presents a favorable outlook for gold, particularly following the negative impact of rising interest rates on the precious metal over the past two years.
According to the CME FedWatch tool, traders are now factoring in a 73.4% probability that the Fed’s initial rate cut will occur as early as June.
However, the Fed also significantly upgraded its economic outlook for the U.S. in 2024, now anticipating growth of 2.1%, up from previous estimates of 1.4%. This adjustment may potentially dampen the safe-haven demand for gold, amidst growing confidence in a smooth economic transition for the U.S.
On Thursday, other precious metals also experienced notable gains. Platinum futures surged by 0.9% to $920.0 per ounce, while silver futures jumped by 3.3% to $25.927 per ounce.
Copper rally continues, attention shifts to PMIs
London Metal Exchange’s three-month copper futures surged by 0.6% to $9,053.50 per ton, with one-month U.S. copper futures also climbing by 0.4% to $4.1078 per pound. These figures remained near the 11-month highs reached earlier in the week.
Attention has now shifted to a series of significant purchasing managers index (PMI) readings expected from major economies in the upcoming days, which could offer further insights into the trajectory of copper demand.
The sharp increase in copper prices this month can be attributed to the potential supply disruptions stemming from production cuts initiated by China’s largest copper refiners.
According to Investing.com
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