Gold Retreats From Record As Traders Weigh Fedspeak, Await Data

An employee handles one kilogram gold bullions at the YLG Bullion International Co. headquarters in Bangkok, Thailand. (Photographer: Chalinee Thirasupa/Bloomberg)

(Bloomberg) -- Gold retreated after hitting a fresh record as investors weighed remarks from policymakers ahead of a key jobs report due Friday.

Minneapolis Fed chief Neel Kashkari said Thursday that interest-rate cuts may not be needed this year if progress on inflation stalls, especially if the economy remains robust. Meanwhile, Cleveland Fed President Loretta Mester separately suggested the central bank could be getting close to the level of confidence it needs to begin lowering rates within months.

Kashkari and Mester was among more than a half-dozen Fed officials that gave speeches or participated in moderated discussions on Thursday.

Other developments influencing the gold trade was a strengthening dollar that pushed bullion lower by as much as 0.9% to $2,279.88 an ounce. Despite the dip, the price was still close to record $2,305.64 reached earlier in the session.

The wave of commentary from Fed officials followed on remarks by Chair Jerome Powell a day earlier, when he offered assurances that it will likely be appropriate to begin lowering borrowing costs “at some point this year.”

Read More: Fed Latest: Mester Says Fed Close to Confidence Level for Cuts

Expectations on when the Fed will start cutting rates have been the key price driver for precious metals, which don't yield interest. Silver earlier jumped to the highest in almost three years before easing.

Gold has been on a tear since mid-February, setting a record each day so far this week. It has also found support from heightened geopolitical risks, including in the Middle East and Ukraine, as well as central-bank purchases.

Bullion is attracting investors who seek a portfolio diversifier and hedge against uncertainty, according to Joni Teves, a precious metals strategist at UBS Group AG.

“The case for building strategic allocations is strong, in our view, given persistent geopolitical risks and the scope for higher volatility and macro uncertainty this year,” she said, citing the looming US presidential election as an example.

Still, gold's upswing has left some market watchers puzzled, especially as real US rates remain elevated, something that's typically a headwind for bullion.

“I definitely think if we continue like this, there has to be some sort of an air pocket, or we hit a correction,” said Kyle Rodda, senior market analyst at Capital.Com Inc. “There doesn't seem to be a particularly good, fundamental reason that is clear and available to everyone to pin the move on.”

Bullion's immediate test will be Friday's US nonfarm payrolls figures — with healthy employment gains expected — and the data's affect, if any, on the Fed's dot plot.

Spot gold fell 0.4% to $2,289.85 an ounce by 4:21 p.m. in New York, following a seven-session rally. That advance has lifted the metal's 14-day relative-strength index to a level some investors see as an indication that prices have risen too far, too fast.

Silver for immediate delivery edged lower after reaching the highest intraday level since June 2021. Platinum also fell and palladium was largely flat. The Bloomberg Dollar Spot Index declined.