Gold prices bolted to an all-time high above US$2,100 per ounce on Monday (Dec 4) as Federal Reserve Chair Jerome Powell’s remarks elevated traders’ confidence that the US central bank could cut interest rates early next year.
Lower interest rates reduce the opportunity cost of holding a non-interest-bearing bullion.
Spot gold was up 0.8 per cent at US$2,087.69 per ounce by 5.20am GMT. Earlier in the session, bullion surged to an all-time high of US$2,111.39.
US gold futures rose nearly 1 per cent to US$2,107.50.
Gold last hit a record US$2,075.47 an ounce in August 2020 when the pandemic boosted haven demand. This time around, its rise has been driven by geopolitical risk and traders aggressively pricing in rate cuts from March next year.
Bullion has rallied almost 16 per cent since early October, a surge that was initially sparked at the start of the Israel-Hamas conflict, but has since been driven by bets that the Federal Reserve will shift to monetary loosening early next year.
Powell last week said the central bank’s policy rate is “well into restrictive territory” in comments that are being interpreted as largely dovish by markets. Lower borrowing costs are typically positive for non-interest bearing bullion.
The market viewed his comments as dovish, sending the dollar index and 10-year Treasury yields lower on Friday, making gold more attractive for other currency holders.
Backing market sentiment, data last week pointed out to cooling inflationary pressures, a gradually easing labour market, with Fed Governor Christopher Waller flagging a possible rate cut if inflation continues to decline.
Investor focus now shift to US non-farm payrolls data – a key employment report due on Friday, that could influence the outlook for US interest rates.
Spot silver edged 0.1 per cent higher to US$25.45 per ounce, palladium fell 0.5 per cent to US$929.10 per ounce, and platinum was down 0.4 per cent at US$996.04.
