Gold prices reached an all-time high of $2,222.39 per ounce on Thursday as US dollar and bond yields slumped. Spot gold soured 1%, hitting $2,208.30 per ounce, while futures jumped 2.3% to $2,211.
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The recent surge for the yellow metal is likely due to the Federal Reserve maintaining its projection of three rate cuts for this year. The development decreases the opportunity cost of holding non-yielding bullion, making it cheaper for traders to hold the yellow metal than other currencies.
While the precious metal surged to a new high, the US Dollar fell to a one-week low against other currencies, and benchmark US 10-year Treasury yields also dipped.
Will Gold continue to surge with oncoming interest rate cuts?
The Federal Reserve decided to keep interest rates steady. However, policymakers expect three-quarters of a percentage point rate cut by the end of 2024.
According to Kyle Rodda, financial market analyst at Capital.com, ‘It’s the goldilocks scenario for gold prices, where marginally higher inflation expectations meet lower nominal rates to create decreased real yields.‘
Rodda added, ‘A dovish Fed, a little squeeze on existing shorts, and a touch of momentum chasing have boosted bullishness in the gold market.‘
Tim Waterer, chief market analyst at KCM Trade, stated, ‘With Powell keeping three potential rate cuts in play this year, bond yields and the USD dipped, which opened a pathway higher for the gold price.‘
If the Federal Reserve fulfills its interest rate cut plans, we may continue to see a surge in prices for the yellow metal.
Moreover, the Federal Reserve’s plans to cut rates later this year have led to a surge in the cryptocurrency market as well. Bitcoin (BTC) has reclaimed the $67k level. With BTC’s halving just around the corner, the crypto market may witness another rally soon.
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