Gold price continues ascent to new highs, nears $2,150/oz

Ingots of melt gold. Stock image.

Gold continued its record-setting rally on Wednesday after the US Federal Reserve reiterated the possibility of an interest rate cut some time this year.

Spot gold rose another 1.0% to a fresh high of $2,149.25 an ounce, surpassing Tuesday’s intraday high of $2,141.60 an ounce. US gold futures went as high as $2,157.50 an ounce in New York.

[Click here for an interactive chart of gold prices]

The uptick follows Fed chair Jerome Powell’s prepared testimony to a House panel, in which he told lawmakers that it will likely be appropriate to begin lower borrowing costs “at some point this year.”

“Powell’s neutral to slightly dovish tilt has given gold and especially silver added momentum into the US session,” said Ole Hansen, a commodity strategist at Saxo Bank A/S.

Gold’s has climbed 5% over the last five sessions, a swift ascent that has taken some in the market by surprise, particularly since there hasn’t been any major change in expectations for when the US central bank will lower borrowing costs.

Swaps markets show a 65% chance of a cut in June, compared with 58% at the end of February, according to Bloomberg data.

“Powell did confirm that cuts are happening later this year,” said Aakash Doshi, an analyst at Citigroup. “There’s less hawkish risk.”

Meanwhile, the bank has raised its gold forecast for the next three months to $2,200 an ounce, and upgraded the projection to $2,300 for the next six to twelve months. It cited recession risks in the second quarter which can favor gold, “especially given the recent equity and credit market rallies.”

Beyond rates, other factors have contributed to gold’s strength. Macro funds, which haven’t been active in the market until recently, were a new force of buying.

Bullion’s role as a haven asset is also being aided by elevated Middle East tensions and disruptions to global shipping, China’s persistent economic woes and the US presidential election at the end of the year.

The risk of a US stock market correction — flagged by weak manufacturing data on Friday — may have persuaded some investors to move out of equities and into gold, Saxo’s Hansen said.

(With files from Bloomberg)