(Bloomberg) — Gold rose above $2,200 an ounce for the first time after the Federal Reserve maintained its outlook for three rate cuts this year, suggesting it is not alarmed by a recent rise in inflation.

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Bullion rose as much as 1.6% in early trading to a record $2,220.89 an ounce before paring back about half of those gains. Since mid-February, yields have risen sharply, supported by long-term support measures, including increased geopolitical risks and central bank purchases, led by China. However, the rapid rise has surprised many seasoned market observers as there has been no clear catalyst.

The rally was driven in part by expectations for looser monetary policy in the US, which was reaffirmed by the Fed on Wednesday. Chairman Jerome Powell continued to point out that officials would like to see more evidence that prices are falling, but “it is still likely in most people’s view that we will reach that level of confidence and that there will be rate cuts,” he said.

“What we saw last night was the green light for gold traders to come back in,” said Chris Weston, head of research at Pepperstone Group Ltd. “The Fed has said that at this point they are tolerant of the inflation that we have seen. We have seen that they are tolerant that the strength of the labor market is not going to be the constraint.”

Speculation around the timing of the Fed’s long-awaited rate change may have fueled recent gains, with data showing traders last week adding to their net long positions on gold by the most since 2019. The metal will benefit even more if US yields According to UBS Group AG, interest rates are actually falling as bullion-backed exchange-traded funds are likely to increase their positions.

Read more: Chinese purchases set the stage for the latest record gold run

On the geopolitical front, there are a number of risks that increase gold’s appeal as a haven. Russia appears to be gaining the upper hand in its war in Ukraine, the conflict between Israel and Hamas continues unabated and has led to a diversion of global shipping, while the US presidential elections at the end of the year could have huge consequences for markets .

The Chinese purchases have also supported prices. In addition to the central bank, ordinary people have also stocked up on coins, gold bars and jewelry to protect their wealth from a years-long real estate crisis and losses in the country’s stock market.

Spot gold rose 0.8% to $2,202.82 an ounce at 12:04 p.m. in Singapore. The Bloomberg Dollar Spot Index fell 0.2%. Silver, platinum and palladium were all higher.

–With help from Jack Ryan.

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