Gold futures advanced on Thursday as Treasury yields and the U.S. dollar retreated following the Federal Reserve’s latest interest-rate rise, as Fed Chairman Jerome Powell and his colleagues signaled only one more hike would likely follow this year.
Price action
-
Gold futures for April delivery
GC00,
+2.45% GCJ23,
+2.45%
gained $30.70, or 1.6%, to $1,980.30 per ounce on Comex. -
Silver futures for May delivery
SI00,
+2.23% SIK23,
+2.23%
advanced 26.4 cents, or 1.2%, to $23.05 per ounce. -
Palladium for June delivery
PAM23,
-0.91%
declined by $13.70, or 1%, to $1,432 per ounce, while platinum for April delivery
PLJ23,
+0.56%
edged up by 90 cents, or 0.1%, to $987.90 per ounce. -
Copper for May delivery
HGK23,
+1.85%
rose 4 cents, or 1%, to $4.084 per pound.
Market drivers
The most-active gold futures contract inched toward the $2,000 per ounce level Thursday, driven by the Fed’s signal that its policy interest rate won’t rise much further.
The Fed hiked its benchmark rate by 25 basis points on Wednesday, but both Chairman Jerome Powell and his colleagues on the FOMC signaled that only one more rate hike would follow at their next meeting in May before a pause. Gold briefly topped $2,000 per ounce earlier this week.
The Fed’s 25 basis-point rate hike, coupled with the ongoing banking crisis, has further strengthened gold’s position as a “safe-haven asset,” said Joseph Cavatoni, chief market strategist, North America, at World Gold Council. “This has resulted in a noticeable increase in the price of gold, indicating that both short-term speculators and long-term investors are showing a strong interest in this asset.”
“Although there may be ongoing short-term volatility in the gold market as investors respond to the rate decision and economic outlook, we expect investors to consider strategic long-term allocations to gold over the course of the year,” said Cavatoni, in emailed commentary.
During Wednesday’s press conference, Powell said Fed officials were uncertain about the path ahead for interest rates, but analysts said he seemed to open the door for this to be the last rate hike for a while.
Gold prices had strengthened ahead of the Fed announcement, and “remained elevated from recent levels when the dot plot suggested the Fed might pause its rate increases after one additional 25 [basis point] hike next month,” George Milling-Stanley, chief gold strategist at State Street Global Advisors, wrote in comments emailed before the chairman’s press conference on Wednesday afternoon. “Market attention now looks set to focus on whether the pause actually occurs, and the timing of a possible pivot to rate cuts.”
Comments from U.S. Treasury Secretary Janet Yellen Wednesday that a blanket bank-deposit guarantee wasn’t being considered had sent stocks reeling Wednesday afternoon while boosting prices of gold.
“A lower dollar and a renewed slide in Treasury yields allowed gold to rebound from near the $1,935 zone,” said Charalampos Pissouros, senior investment analyst at XM.
In Thursday dealings, U.S. benchmark stock indexes moved higher, while the ICE U.S. Dollar index
DXY,
was modestly lower at 102.288 and the yield on the 10-year Treasury
TMUBMUSD10Y,
fell to 3.482% from 3.497% Wednesday afternoon.