Gold reaches fifth record peak in March amid speculation of Fed rate cut

Gold prices reached new highs on Thursday, marking the fifth record peak this month, following signals from the US Federal Reserve indicating its intention to proceed with three interest rate cuts in 2024 despite persistent inflation, Azernews reports, citing Reuters.

Spot gold rose by 1.1% to $2,209.65 per ounce at 1035 GMT, hitting an unprecedented level of $2,222.39 earlier in the trading session. Meanwhile, US gold futures surged by 2.4% to $2,212.40.

Julius Baer analyst Carsten Menke attributed the rally to the Federal Reserve's remarks confirming its plan to eventually lower US interest rates, leading to a bullish sentiment in the gold futures market. However, Menke noted a softness in the physical gold market.

Despite recent high inflation figures, Fed Chair Jerome Powell indicated that the central bank is still likely to reduce interest rates by three-quarters of a percentage point by the end of 2024, contingent upon further economic data.

Fed funds futures traders are now anticipating a 74% probability of rate cuts commencing in June, up from 60% before the rate decision, as per the CME Group's FedWatch Tool.

The dollar weakened to a one-week low against its counterparts, while benchmark US 10-year Treasury yields also declined.

Lower interest rates reduce the opportunity cost of holding gold, making it more attractive to investors, and subsequently weigh on the dollar, thereby enhancing the appeal of gold priced in other currencies.

According to Reuters' technical analyst Wang Tao, spot gold might challenge resistance at $2,222 per ounce, with a breakthrough potentially leading to gains in the $2,228-$2,234 range.

Spot silver decreased by 0.4% to $25.51 per ounce, platinum rose by 0.6% to $912.10, and palladium fell by 0.9% to $1,012.22.