Gold extends record run as Fed’s Powell hints at rate cuts

© Reuters. FILE PHOTO: Ingots of 99.99 percent pure gold are processed at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File photo

By Brijesh Patel and Sherin Elizabeth Varghese

(Reuters) – Gold prices extended gains to hit an all-time high on Thursday after comments from U.S. Federal Reserve Chair Jerome Powell fostered expectations for lower U.S. interest rates this year.

Gold tends to thrive when interest rates are low, which reduce the opportunity cost of holding non-yielding bullion.

Spot gold gained 0.4% to $2,155.90 per ounce, as of 1230 GMT. U.S. gold futures rose 0.3% to $2,163.50.

Bullion hit a record high of $2,161.09 earlier in the session and was on track for its longest intra-day winning streak since at least November 2021.

Powell said on Wednesday rate cuts will “likely be appropriate” later this year “if the economy evolves broadly as expected” and once officials gain more confidence in inflation’s steady deceleration. Powell will speak again later in the day.

“The primary driver in this recent rally in gold is a continued decline in real yields, with inflation expectations continuing to cool, pushing buyers into gold from money market accounts and Treasuries,” said SP Angel analyst Arthur Parish.

Powell’s remarks, coupled with data released the same day indicating softer labour market conditions, pushed U.S. Treasury yields and the dollar lower, boosting demand for gold. [USD/] [US/]

Friday’s U.S. non-farm payrolls report for February is expected to provide more clarity on U.S. rate cuts.

If the labour market data or next week’s inflation data shows any weakness, $2,300 would be the short term target based on technical levels, but that would be fairly a short-lived phenomenon, before prices correct and consolidate, Marcus Garvey, head of commodities strategy team at Macquarie, said.

Spot silver was steady at $24.14, while platinum climbed 1.2% to $918.25 per ounce.

Palladium slipped 0.6% to $1,036.26, after surging as much as 12% in the last session.

“Prices can rally further on looming production cuts … persistently weak secondary supply, and macro tailwinds including softer U.S. economic data and strong China credit prints,” Citi research wrote in a note.