Gold Reaches Record High Amid Speculation of Fed Rate Cuts Beginning in March

Shafaq News/ Gold prices surged to an all-time high on Friday, propelled by statements from Federal Reserve Chair Jerome Powell that bolstered traders' confidence in completing the U.S. central bank's monetary policy tightening and the potential for rate cuts starting in March.

Spot gold experienced a 1.6% climb, reaching $2,069.10 per ounce. With a weekly gain of 3.4%, prices peaked at $2,075.09 per ounce, surpassing the previous record of $2,072.49 in 2020. Simultaneously, U.S. gold futures settled 1.6% higher at a record peak of $2,089.7.

It's essential to note that these records are in nominal terms, and when adjusted for inflation, gold's actual all-time high was in early 1980, equivalent to $3,452.40 an ounce today.

Powell's remarks at Spelman College in Atlanta, acknowledging balanced risks of monetary tightening, fueled the optimism of gold bulls. Despite Powell's caution against premature speculation on easing rates, traders focused on the notion that the current rate is in restrictive territory, anticipating potential cuts.

Tai Wong, a New York-based independent metals trader, remarked, "Gold bulls are focusing on Powell's comment that [the current] rate is well into restrictive territory, which plays into the narrative that cuts will come sooner, pointedly ignoring his warning that it was premature to speculate on easing rates."

Market expectations for rate cuts in March and an interest rate below 4% by the end of next year gained traction, with current Fed funds standing at 5.25%-5.50%.

Lower interest rates reduce the opportunity cost of holding gold, weakening the dollar's value. However, concerns were raised about potential overbought territory and the tendency of gold to prematurely factor in monetary policy expectations.

Benchmark 10-year Treasury yields slipped to a 12-week low, and the dollar edged 0.3% lower.

Everett Millman, chief market analyst at Gainesville Coins, anticipated the continuation of gold's Santa Claus rally until the year-end.

Silver gained 0.9% to a six-month high of $25.47 per ounce, marking a third consecutive weekly rise. Platinum rose 0.6% to $932.44, while palladium lost 0.3%, settling at $1,004.92 per ounce.