Gold hits new record above $2,300 after Jerome Powell's comments on interest rates

Fed chief says it will probably be appropriate to begin lowering borrowing costs 'at some point this year'

Jerome Powell, chairman of the Federal Reserve. AFP

Gold set another record high above $2,300 an ounce based on the likelihood the Federal Reserve will cut interest rates this year and sustained demand from central banks.

Bullion touched a peak of $2,304.96 an ounce before trading as investors took comfort in Fed chairman Jerome Powell’s assurance on Wednesday that it could be appropriate to begin lowering borrowing costs “at some point this year”.

Silver held near the highest level in almost three years. Lower rates are generally positive for non-yielding precious metals.

Gold has been on a tear since mid-February – setting a record each day so far this week – as investors wager that it stands to benefit from the impending pivot by the Fed. Bullion has found additional support from heightened geopolitical risks, including in the Middle East and Ukraine, as well as central-bank purchases.

The latest data compiled by the World Gold Council showed that central banks continued adding to their gold holdings in February, marking the ninth straight month of accumulation. China dominated purchases, with India and Kazakhstan also eager buyers.

Still, gold’s upswing has left some market watchers puzzled, especially as real US rates remained elevated – typically a headwind for bullion.

“I definitely think if we continue like this, there has to be some sort of an air pocket, or we hit a correction,” said Kyle Rodda, senior market analyst at Capital.Com.

“There doesn’t seem to be a particularly good, fundamental reason that is clear and available to everyone to pin the move on.”

Spot gold was steady at $2,300.25 an ounce at 10.13am in Singapore following a seven-day rally. That sustained advance has lifted the metal’s 14-day relative-strength index to 83, well above the level of 70 that some investors see as an indication that prices have risen too far, too fast.

Silver for immediate delivery was little changed after hitting $27.3355 an ounce, the highest intraday level since June 2021, while palladium and platinum edged higher. The Bloomberg Dollar Spot Index was steady after a two-day drop.

Investors will closely watch non-farm payroll data on Friday for further clues on the health of the US economy and the likely path of monetary policy. Strong employment gains are expected, according to a Bloomberg survey.