Gold extends rally to record as Powell hints at rate cut in 2024

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, Sept 15, 2023. REUTERS/Alexander Manzyuk/File photo

Gold prices surged to a record high on Thursday, poised for their seventh consecutive daily rise, led by sluggish U.S. economic data and Federal Reserve Chair Jerome Powell’s indications of potential rate cuts in the coming months should inflation alleviate.

Spot gold rose 0.3 percent to $2,155.42 per ounce, as of 0723 GMT. U.S. gold futures added 0.2 percent to $2,163.10.

Bullion continued its record-breaking rally, reaching an all-time high of $2,161.09 earlier in the session and looked set for its longest intra-day winning streak since at least November 2021.

READ: Gold to enter 2024 with sights set on record highs

The marginal weakness in U.S. data gave gold a reason to rally, yet the magnitude of movement appears disproportionately large, possibly influenced by large futures buying that commenced on Friday, Marcus Garvey, head of commodities strategy team at Macquarie, said.

Safe investment option

Gold got a boost on Wednesday after Powell indicated that interest rate cuts were likely in the coming months “if the economy evolves broadly as expected,” along with further evidence of falling inflation. Powell will speak again later in the day.

Lower rates boost the appeal of non-yielding bullion.

Powell’s remarks, coupled with data released the same day indicating a softening of labor market conditions, resulted in U.S. Treasury yields and dollar sliding, increasing the appeal of gold.

If Friday’s labor 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, Macquarie’s Garvey said.

Geo-political uncertainty

“We expect central bank buying to continue on the back of geo-political uncertainty. Slowdown in China will keep global growth contained. Hence, in an uncertain financial environment, gold will remain safe investment for banks,” said Jigar Pandit, head of commodity and currency business at BNP Paribas’ Sharekhan.

Spot silver fell 0.4 percent to $24.08, while platinum dipped 0.3 percent to $904.83 per ounce, and palladium slipped 1.5 perent to $1,026.80, after surging more than 12 percent in the last session.