Gold prices hit a record high in Asian trade on Thursday, tracking a sharp drop in the dollar after the Federal Reserve kept interest rates steady and signaled that it was still considering rate cuts this year.
The dollar slid after the Fed meeting, sinking 0.6% and buoying the broader commodity complex. Copper prices rose back towards 11-month highs, while other precious metal prices also rose.
But gold was a standout performer, notching new highs on the prospect of lower interest rates in the coming months. Spot gold rose as much as 1.2% to a record high of $2,222.14 an ounce, while gold futures expiring in April surged more than 2% to a record high of $2,224.80 an ounce. Both instruments trimmed some gains by 22:27 ET (02:27 GMT), but were above the $2,200 level.
Gold and broader metal markets had seen some consolidation ahead of the Fed meeting.
Fed keeps rate cut hopes alive, June bets grow
Fed Chair Jerome Powell said that while he did see some recent stickiness in inflation, the underlying story of easing inflation remained intact. This was coupled with Fed officials forecasting a 75 basis point drop in interest rates by end-2024.
Such a scenario bodes well for gold, especially after rising interest rates dented the yellow metal over the past two years.
Traders were now pricing in a 73.4% chance that the Fed’s first rate cut will come as soon as June, according to the CME Fedwatch tool.
Still, the Fed also substantially upgraded its outlook for the U.S. economy in 2024, now forecasting growth of 2.1%, compared to prior forecasts of 1.4%. This could potentially limit safe haven demand for gold, amid increasing optimism over a soft landing for the U.S. economy.