Gold prices surged to a record high in Asian trade on Monday, driven by a series of recent gains and market speculation regarding potential interest rate cuts by the Federal Reserve in March 2024. These gains were bolstered by factors such as easing inflation, soft labor market data, and less-hawkish signals from the Fed.
In addition to these factors, the near-term demand for gold was further fueled by an attack on an American warship and commercial vessels in the Red Sea. This event heightened concerns about a potential escalation in the Israel-Hamas war.
Chair Jerome Powell’s recent statements also played a role in shaping market expectations. While he reiterated that U.S. rates would remain higher for a longer period, there were changes in his signaling that suggested a different outlook. Powell acknowledged the progress made in curbing inflation and the potential for a “soft landing” for the U.S. economy. These signals reinforced expectations that the Fed may not raise interest rates in December and could potentially start cutting them by March 2024.
As a result of these factors, spot gold experienced a significant jump of nearly 2%, reaching a record high of $2,148.78 per ounce. February gold futures also rose by 2%, reaching a record high of $2,151.20 per ounce. It is worth noting that both instruments were slightly below their peak prices by 19:16 ET (00:16 GMT).
Furthermore, gold enjoyed strong gains throughout last week and also registered a consecutive monthly increase in November. This demonstrates the sustained upward momentum in gold prices in recent times.