Gold builds to a new record high over the $2600 benchmark early Friday after rallying Thursday on the Federal Reserve’s mid-week interest rate cut. The bullion also getting a boost from on-going geopolitical concerns in the Mid-East.
The yellow metal climbed after the Fed reduced interest rates by 50 basis points in the central bank’s first rate cut since the pandemic. Interest rate cuts are typically considered bullish for gold and some other assets, which become more attractive alternate investments when rates go down. U.S. equities soared Thursday, with both the Dow Jones industrial average and the S&P 500 index setting new record highs.
Front-month gold futures rose 0.6% Thursday to settle at $2,614.60 an ounce on Comex. The most-active December contract added 0.2% in the first four days of the week. Bullion advanced 2.2% in August after increasing 5.7% in July, its biggest monthly gain since March. Gold fell 0.3% in June. The metal rose 13% in 2023. The December contract is currently up $22.90 (+0.88%) an ounce to $2637.50 and the DG spot price is $2610.10.
Investors had been almost equally split between whether the Fed would cut rates by 25 or 50 basis points this week, though sentiment leaned more toward the 50 basis point cut in the week or so before the announcement. The central bank reduced rates to 4.75% to 5.00% Wednesday after keeping them at 5.25% to 5.50% for a year. Before that, the Fed had raised rates by 5.25 percentage points since March 2022 to rein in inflation.
Fed Chairman Jerome Powell said in a news conference following the announcement that nobody should assume that 50 basis points “is the new pace” for reductions. He said the economy is “basically fine” and expressed confidence in the labor market. The Fed has said it closely looks at both inflation and labor market data when crafting monetary policy.
About 58.3% of investors tracked by the CME FedWatch Tool now expect a 25 basis point drop in November, with the rest anticipating another 50 basis point reduction. Most expect rates to drop to 4.00% to 4.25% or lower by the end of 2024.
The Bank of England on Thursday held interest rates at 5%, and the Bank of Japan kept interest rates steady Friday, in line with expectations.
Front-month silver futures increased 2.4% Thursday to $31.42 an ounce on Comex. The December contract advanced 1.1% in the first four days of the week. Silver gained 0.7% last month after dropping 2.1% in July and falling 2.9% in June. It ticked up 0.2% in 2023. The December contract is currently up $0.072 (+0.23%) an ounce to $31.495 and the DG spot price is $31.11.
Spot palladium rose 3.2% Thursday to $1,105.00 an ounce and is up 2.3% so far this week. Palladium increased 3.2% last month after decreasing 4.3% in July and gaining 8.1% in June. Palladium plummeted 38% last year. Currently, the DG spot price is down $29.60 an ounce to $1079.00.
Spot platinum gained 2.1% Thursday to $997.90 an ounce. It fell 0.7% in the first four days of the week. Platinum slid 5.2% in August after losing 2.1% in July and falling 3.7% in June. Platinum dropped 6.8% in 2023. The DG spot price is currently down $8.20 an ounce to $990.20.
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