Fed’s rate cut sends gold soaring past US$2,200 per ounce

Thanks to the announcement from the Fed that they would continue with three rate cuts this year, gold jumped above $2,200 per ounce to even set the first ever record for gold exchange in the world. While the Federal Reserve does not seem to be concerned with this current inflation surge, it is likely that other measures will be taken to control the skyrocketing prices in the near future.

The first market session brought extremes with a record high supply retracting slightly. Since mid-February, the rise has boasted such solid fundamentals comprising of rise to purchasing by central banks and growing political risks, among others.

The apparently spectacular jump has surprised many long-time market analysts, since the move is not based on any plausible and clear cause.

US Fed’s Policy Relaxation Speculation Fuels

Some of the magnitude of this upsurge is derived from the confidence that the US Fed may adjust its policies to become more relaxed starting yesterday, which is just an example. The Chair, Mr. Jerome Powell, nonetheless maintained that prudence would still hold sway over admittance of more price reductions as evidence.

‘Chris Weston, Pepperstone Group Ltd. head of research, also presented his argument that traders would see this as the green light to get back to the market as the most precious metal,’ he said.

“The Fed has signaled that they will not aggressively act to address inflation and labour market conditions as that would be unacceptable right now.”

The long-awaited Fed’s pivot, which is when central bank policies shift, acted as the tipping point, causing recent gains in the market. The data shows that the market took a bullish view towards gold and increased its net long positions on gold by the most since 2019.

Lastly, UBS Group AG suggests that the metal may benefit from this US interest rates drop in the next few days also, with the gold-solid exchange-traded funds likely to experience a boost.

Geopolitics not only heighten the desirability of bullion but also expands its functions significantly. The F races in trends; for instance, the outside actors there have the advantage in the Ukraine war, and the redirection of international shipping vessels because of the Israel-Palestine conflict and the coming US presidential election that might affect the market at the end of the year all factor in this case.

“It’s still likely in most people’s view that we will achieve that confidence and there will be rate cuts.”

Buying gold by Chinese by the Chinese has remained a benefactor of the market. Besides the Central Bank, the coinage, the gold bars and the jewellery are hoarded separately by the ordinary individuals to repel the prolonged property slump and market loss of stocks. This is according to the report of Bangkok Post.

The price was 0.7% higher than last night, trading at US $2,201 per ounce at 9:40 am Singapore time. To put it in a different way, the Bloomberg Dollar Spot Index dropped by 0.2%. It has also been noted that silver, platinum, and palladium made a bullish move during this period.