Gold prices rose to a record high on Thursday, fueled by expectations of a Fed rate decrease in June.
On Thursday, the gold price (XAUUSD) continued its upward trajectory for the seventh day in a row, reaching a new all-time high around $2,161 heading into the European session. During his semi annual congressional testimony on Wednesday, Federal Reserve (Fed) Chair Jerome Powell reiterated expectations for an immediate interest rate drop later this year.
The USD remains at a month low, providing additional support to the XAUUSD.
This maintains the US Dollar (USD) on the defensive and at its lowest level since early February and appears to be a crucial element driving the non-yielding yellow metal higher.
Aside from a generally milder tone, geopolitical worries resulting from Middle Eastern conflicts and fears about China’s economy appear to bolster the safe-haven gold price. Meanwhile, Minneapolis Fed President Neel Kashkari downplayed reports of more aggressive policy easing. This, together with a minor rise in US Treasury bond yields, helps limit the Greenback’s potential downside and curbs gains for the precious metal under severely overbought conditions on the daily chart.
Daily Market Movers: Gold continues to benefit from Fed rate drop bets, weaker risk tone.
Bets that the Federal Reserve will begin reducing interest rates in June. , together with geopolitical worries and China’s economic troubles, pushed the non-yielding gold price to a new high on Wednesday.
Fed Chair Jerome Powell told US legislators on Wednesday that if the economy evolves generally as expected, the central bank would likely lower its benchmark interest rate later this year.
The current market pricing shows a higher probability, around 70%, of a June Fed rate drop, which dragged the 10-year US government bond yield to a one-month low on Wednesday.
Minneapolis Fed President Neel Kashkari stated that he had planned two rate cuts for 2024 and that he may reduce the amount of cuts due to improving macroeconomic indicators.
Meanwhile, the Fed’s rate-cutting path remains uncertain. The US Dollar is nearing its lowest level since early February and should continue to act as a tailwind for the precious metal.
A milder risk tone supports the safe-haven commodity, despite an overbought RSI.
A Houthi missile strike on a cargo ship in southern Yemen killed three crew members, the first casualties since the Iran-backed group’s strikes on vessels in the Red Sea.
This increases the potential of further escalation of military measures in the Middle East and boosts the possibility of the safe-haven commodity continuing its well-established short-term upswing.
Traders are now looking forward to the publication of the US Weekly Initial Jobless Claims data and Fed Chair Jerome Powell’s second day of hearing for some momentum ahead of Friday’s US NFP report.
