Gold surged to a new record and Bitcoin broke the $40,000 barrier for the first time in 19 months in Asian trading on Monday, as markets shrugged off US Federal Reserve chairman Jerome Powell’s reminder that policymakers are in no hurry to ease interest rates.
The precious metal jumped as much as 3.1 per cent to $2,135.39 an ounce while Bitcoin was up 4.69 per cent at $41,267.53 as of 9.20am UAE time.
“Markets are piling in on the rate cut bets,” said Kyle Rodda, a senior market analyst at Capital.com in Melbourne. “Gold can run higher and will do at the earliest sign of a recession.”
The rally in gold and Bitcoin comes even as the dollar edged higher and policy sensitive two-year Treasuries pared Friday’s strong gains, as traders held bets the Fed could cut as early as March.
Swaps have priced a full reduction by May and project a full point of easing by December 2024.
The central bank is ready to raise rates further if needed, although policy is “well into restrictive territory”, Mr Powell noted on Friday.
US stocks closed at their highest since March 2022 and two-year yields at their lowest since June on Friday as signs pile up that American households are starting to pull back, after defying expectations all year and splurging over the summer.
A measure of US factory activity shrank for a 13th straight month in November as high interest rates continue to hammer the goods-producing side of the economy.
“The big rebound in shares has left them technically overbought and at risk of a consolidation or short term pull back,” Shane Oliver, head of investment strategy and chief economist at AMP in Sydney, wrote in a note to clients.
“However, further gains are likely into year end and early next year as inflation continues to ease” and positive market seasonality kicks in later this month, he said.
Elsewhere, Bitcoin closed in on $41,000, extending the year’s rebound amid bets on lower interest rates and as the industry awaits potential approval of US spot Bitcoin exchange-traded funds.
This week, traders will be monitoring for clues to the health of the global economy with Australian growth, Chinese inflation and US non-farm payrolls data all due.
The Reserve Bank of Australia is expected to sound hawkish as it keeps its rate on hold on Tuesday after Governor Michele Bullock warned inflation was now home-grown.
While the cooler-than-expected inflation will keep the RBA on hold, “sticky ‘home-grown’ services inflation will ensure a tightening bias is retained”, Tony Sycamore, an analyst at IG Group in Sydney, wrote in a note to clients.
“A rate hike in February hinges on the outcome of the December quarter inflation due for release in late January.”