Gold Rises Above $2,600 to New Record as Traders Eye More Cuts
Gold resumed a rally to a fresh all-time high, with traders digesting the outlook for further interest-rate cuts after the Federal Reserve this week kicked off its monetary-easing cycle.
Bullion jumped as much as 1.3% to $2,619.39 an ounce on Friday, with gains supported by dollar weakness spurred by the Fed's 50-basis-point cut on Wednesday. While that was seen as an aggressive start to its pivot to looser policy, Chair Jerome Powell said that the move was to ensure continued resilience in the US labor market and prevent further economic weakness.
"Although the Fed move was largely anticipated (and so priced in), the beginning of a cutting cycle will undoubtedly be bullish for gold," said Matt Schwab of Quantix Commodities, a Greenwich, Connecticut-based hedge fund. Schwab expects a near-term pullback in prices given positioning is "extreme" at the moment, but "falling rates should further gold's fundamental driven rally."
Money managers' net bullish positions in Comex gold positions were hovering around the highest in four years, according to latest CFTC data.
Over the past two decades, gold increased by an average of 6% during the first six months following the start of the Fed's rate cut cycle, according to John Reade, market strategist at the World Gold Council.
"Combine this with the US election, we've got an interesting six months ahead of us on the gold front," he wrote in a LinkedIn post.
Still, concerns about a slowdown persist after several major US companies — including FedEx and Skechers U.S.A. Inc. — issued warnings this week about misses and weak demand. Lower borrowing costs tend to aid gold, as it doesn't pay interest.
The metal is up nearly 27% this year, with recent gains supported by the anticipation of Fed easing. Central-bank buying and haven demand due to conflicts in the Middle East and Ukraine have also helped, while interest from retail investors has picked up. Its strength in the first half was also fueled by strong demand from Asian consumers.
Spot gold was 1.1% higher at $2,613.87 an ounce as of 10:59 a.m. in New York, up 1.4% for the week. The Bloomberg Dollar Spot Index rose 0.3%. Silver advanced, while platinum and palladium declined.
Source : Bloomberg
