(Bloomberg) — Gold Surges to New All-Time High, Defying Fed’s Attempt to Temper Optimism
Gold skyrocketed past its previous all-time high set during the pandemic, fueled by growing expectations for US rate cuts in early 2024. Despite the Federal Reserve’s efforts to temper optimism, the precious metal surged more than 3% in early trading on Monday, surpassing its previous record set in August 2020, before paring much of those gains.
The rally in gold has been gaining momentum since October, and it received a major boost on Friday following remarks by Fed Chair Jerome Powell, which led to a plunge in the dollar and Treasury yields. Powell’s attempt to push back against rate-cut optimism was met with skepticism, and swaps markets now see around a 55% chance of a reduction in March, with a cut fully priced in for May.
“Gold has experienced a significant momentum shift,” said Chris Weston, head of research at Pepperstone Group Ltd. However, there may be downside risk for bullion with US labor data due later this week, as bets on lower real rates into next year appear very aggressive.
Gold is currently trading at $2,086.67 an ounce, following a 1.8% increase on Friday. While gold’s surge has been attributed to various factors, it has benefited from haven buying, the weakening dollar, and growing expectations for US rate cuts, which have driven a 15% increase from its low in October.
Even gold miners are seeing an uptick in their shares, with companies like Newmont Corp. and Zijin Mining Group Co. experiencing notable gains in response to the surge in gold prices.
Despite the positive outlook for gold, analysts at ANZ Group Holdings Ltd. warn that rising real rates due to retreating inflation against steady rates could put a damper on gold investment in the first quarter of 2024, as ETF holdings have yet to see a material lift.
As gold continues to make waves and set records, it remains to be seen how it will weather the changing landscape of the global economy.
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