Gold Soars as Dollar Falls Sharply Amid Rate Cut Uncertainty

Gold prices crossed $2,300 to post new record highs on Thursday in Asian trade, finding support from solid demand for safe-haven assets and a falling US dollar amid doubts over the timing and extent of the Federal Reserve’s potential interest rate cuts.

Spot gold hit a record of $2,302.58 per ounce before easing to trade at $2,299.77, while June contract gold futures climbed to a record high of $2,322.25 per ounce and last stood at $2,318.95.

The demand for yellow and other precious metals has grown stronger as fighting in the Middle East, and the Russia-Ukraine war continued. The 7.4-magnitude earthquake that struck Taiwan on Wednesday also contributed to the upturn.

Further aiding prices was a sharp drop in the greenback after the possibility of cutting the benchmark interest rates later this year was maintained. However, it remained unclear as to when the reduction may begin.

Other precious metals, including platinum and silver, traded mixed on Thursday. Platinum futures expiring in July fell 0.10% to $951.20 per ounce, while silver futures expiring in May advanced 0.52% to $27.200 per ounce.

Gold Gains on Weaker Dollar Amid Mixed Rate Cut Signals

The upturn in gold prices was largely due to weakness in the dollar as the US dollar index declined almost 1% against major peers after reaching its highest in 4-1/2 months earlier this week.

The greenback was dragged mainly by mixed signals from the Fed regarding rate cuts. Chairman Jerome Powell reiterated on Wednesday that they still expect to trim interest rates in 2024, but he provided few details about the possible timing and extent of the reductions.

The lack of clarity shored up demand for gold, driving it to record peaks for the third consecutive session.

Members of the Federal Open Market Committee (FOMC) are also due to speak this week, with remarks from Fed Governor Michelle Bowman and Richmond Fed President Thomas Barkin set to be provided later in the day.

Still, Friday’s release of the US nonfarm payrolls data for March will be in focus, as the central bank will primarily factor in sticky inflation and the labor market’s health to adjusting interest rates this year.

Fed officials have cautioned that sticky inflation may hinder any potential plans for lowering interest rates.

Further signals on US interest rates may establish the level of gold prices’ surge, considering the yellow metal has moved opposite to the dollar and Treasury yield in the last two years.