Gold prices surged to record levels in Asian trading on Thursday, following a significant decline in the dollar subsequent to the Federal Reserve’s decision to maintain interest rates and signal potential rate cuts later in the year.
The dollar’s retreat after the Fed meeting, slipping by 0.6%, provided support to the broader commodity market. Copper prices approached 11-month highs, while other precious metals also witnessed gains. However, gold stood out as the top performer, hitting new highs amidst expectations of lower interest rates in the near future. Spot gold surged by as much as 1.2% to reach a record high of $2,222.14 per ounce, while gold futures expiring in April soared over 2% to a peak of $2,224.80 per ounce. Despite some retracement by 22:27 ET (02:27 GMT), both instruments remained above the $2,200 level.
Gold and other metal markets experienced consolidation leading up to the Fed meeting.
Fed Sustains Hope for Rate Cuts, June Seen as Likely Timing
Federal Reserve Chair Jerome Powell acknowledged some recent inflationary pressures but reiterated the overall narrative of easing inflation. Fed officials also projected a 75 basis point reduction in interest rates by the end of 2024. Such indications favor gold, particularly following the impact of rising interest rates on the precious metal in recent years.
Market participants are now pricing in a 73.4% probability of the Fed’s initial rate cut occurring as early as June, according to the CME Fedwatch tool. Nonetheless, the Fed notably revised its economic outlook for the U.S. in 2024, anticipating a growth rate of 2.1%, compared to previous estimates of 1.4%. This could potentially dampen safe-haven demand for gold amid growing optimism surrounding the U.S. economic outlook.
Sharp Rise in Other Precious Metals
Platinum futures surged by 0.9% to $920.0 per ounce, while silver futures experienced a notable 3.3% increase to $25.927 per ounce.
Resumption of Copper Rally
Three-month copper futures on the London Metal Exchange climbed by 0.6% to $9,053.50 per ton, with one-month U.S. copper futures rising by 0.4% to $4.1078 per pound. Both contracts were in proximity to 11-month highs achieved earlier in the week. Market attention is now focused on forthcoming purchasing managers index (PMI) readings from major economies, expected to provide further insights into copper demand trends.
Copper prices have surged this month, driven by concerns of potential supply disruptions stemming from production cuts by China’s leading copper refiners.