Gold prices hit a new record on Thursday, breaking above $2,300 per ounce, as recent comments from Federal Reserve officials cemented market expectations that U.S. interest rates are eventually headed lower.
Spot gold was recently down 0.4% at $2,290.72 the ounce after earlier hitting an all-time high of $2,304.09.
U.S. gold futures fell 0.2% to $2,310.2.
“There is big demand coming from Asia, particularly from China and solid demand from central banks. We have geopolitical risks and expectations around central banks cutting rates. All these factors are lifting gold prices higher,” said Carlo Alberto De Casa, a market analyst at Kinesis Money.
Fed officials including Chair Jerome Powell on Wednesday reinforced the need for more debate and economic data before interest rates are cut, a move financial markets expect to occur in June.
Interest rate futures currently price in about a 59% chance that the Fed will cut rates in June, according to the CME FedWatch tool. Gold, which pays no interest and earns no profits, benefits when interest rates fall as this reduces the opportunity cost of holding bullion.
Focus now shifts to U.S. non-farm payrolls for March due on Friday that could shed more light on the timing of the first rate cut from the Fed.
Strong central bank buying and firm safe-haven inflows amid growing geopolitical tensions have boosted demand for gold, which has risen more than more 25% since October.
“Gold’s blistering rally may have further room to run in the medium term,” Singapore bank OCBC said in a note.
“Historical evidence since 2001 showed that gold strengthened when [the] Fed rate hike cycle ended and continued to extend its bullish run when [a] Fed rate cut cycle gets underway. That said, we caution for the risk of a pullback,” the bank said.
Spot silver fell 0.8% to $27.00 per ounce after reaching its highest since June 2021. Platinum rose 0.4% to $940.25 and palladium slipped 0.4% to $1,009.68.