Gold prices rallied to hit new records on Thursday, on track for their seventh consecutive daily rise, led by weak US economic data and Federal Reserve Chair Jerome Powell’s indications of potential rate cuts in the coming months if inflation eases.
Spot gold rose 0.5 percent to $2,159.79 per ounce, after hitting an all-time high of $2,161.09 earlier in the session. US gold futures added 0.4 percent to $2,167.00.
The marginal weakness in US data gave gold a reason to rally, yet the magnitude of movement appears disproportionately large, possibly influenced by large futures buying that commenced on Friday, Marcus Garvey, head of commodities strategy team at Macquarie, said.
Gold got a boost on Wednesday after Powell indicated that interest rate cuts were likely in the coming months”if the economy evolves broadly as expected,” along with further evidence of falling inflation. Powell will speak again later in the day.
Lower rates boost the appeal of non-yielding bullion.
Powell’s remarks, coupled with data released the same day indicating a softening of labor market conditions, resulted in US Treasury yields and dollar sliding, increasing the appeal of gold.
If Friday’s labor market data or next week’s inflation data shows any weakness, $2,300 would be the short term target based on technical levels, but that would be fairly a short lived phenomenon, before prices correct and consolidate, Macquarie’s Garvey said.