Spot Gold hits fresh record high on Fed rate cut prospects

Spot Gold traded in proximity to a fresh all-time high of $2,168.78 on Friday and looked set for a 3.92% weekly advance, as the US Dollar and Treasury yields eased on mounting bets that the Federal Reserve will begin reducing interest rates this year.

“While a spur of short-term speculative activity primarily driven by Commodity Trade Advisors and algorithmic trading prompted the gold rally, it’s very much this expectation of interest rate cuts in the not-too-distant future that’s backing it,” Nikos Kavalis, managing director at Metals Focus, was quoted as saying by Reuters.

Yesterday in his testimony before the US Senate, Fed Chair Jerome Powell suggested that if the US economy fared as expected and signs of moderating inflation proved sustainable, the central bank would consider “carefully removing” its restrictive monetary policy stance.

Markets are pricing in three to four 25 basis point Fed rate cuts this year, with the chance of the first cut taking place in June at 75%, according to LSEG’s interest rate probability app.

Lower interest rates reduce the opportunity cost of holding Gold.

Meanwhile, investor focus now sets on the key US employment figures for February due out at 13:30 GMT today. Employers in all sectors of the US economy, excluding farming, probably added 200,000 job positions in February, according to market consensus, following a job growth of 353,000 in January.

As of 8:34 GMT on Friday Spot Gold was edging up 0.21% to trade at $2,164.70 per troy ounce.

Gold Futures for delivery in April were up 0.24% on the day to trade at $2,170.45 per troy ounce.

The surge in gold prices could dull demand during the wedding season in India, analysts warned.

Elsewhere, Silver Futures for delivery in May were up 0.39% to trade at $24.675 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching up 0.06% to 102.855 on Friday. The DXY hovered above an eight-week low of 102.722.