Gold Tops $2,300 After Powell Reiterates Rate-Cut Path This Year

(Bloomberg) -- Gold rose to another record, extending a weekslong rally after Federal Reserve Chair Jerome Powell reiterated that it will likely be appropriate to begin lowering interest rates “at some point this year.”

Powell said recent inflation figures — though higher than expected — didn't “materially change” the overall picture, according to his Wednesday speech at California's Stanford University. He signaled policymakers will wait for clearer signs of lower inflation before cutting interest rates. Lower rates are generally positive for gold since it pays no interest.

Bullion rose as much as 0.9% to a new all-time high of $2,301.21 an ounce. While Powell repeated the Fed's wait-and-see approach, the US central bank's rate-cutting path remains unchanged. That's “very gold positive as it suggests that the Fed will cut significantly before the inflation target is reached,” said Bart Melek, global head of commodity strategy at TD Securities.

The precious metal has risen more than 10% this year, setting a series of records along the way. While the expected pivot by the Fed is positive for non-interest-bearing gold, the sharp rally over the past month has been marked by often-outsized moves that lacked a clear catalyst to justify the gains, as investors have piled into the bullion market.

Persistent tensions in the Middle East and Ukraine have bolstered the precious metal's role as a haven asset, while central bank buying supported prices at historically high levels during the past year, despite rising interest rates.

The latest data compiled by the World Gold Council shows central banks continued adding to their gold holdings in February, albeit at a slower pace than before. They bought a net 19 tons, marking the ninth straight month of growth.

Read More: Gold Demand to Hit Record With Central-Bank Buying, WGC Says

Still, gold's record run has yet to attract investors who favor exposure to the metal through physically backed exchange-traded funds. Worldwide holdings in such ETFs shrank by more than 100 tons year-to-date, hitting the lowest level since September 2019, according to a Bloomberg tally.

Bullion was up 0.9% to settle at $2,300 an ounce at 5 p.m. in New York. Its 14-day relative-strength index was 83, above the 70-level that indicates to some investors prices may have risen too far and too fast. Silver climbed 4% to close at $27.18 an ounce, the highest since June 2021. Platinum and palladium rose.

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