Gold hits fresh record on Fed rate-cut hopes, rising haven demand

Melbourne– Gold surged to an all-time high, boosted by increasing optimism that the US Federal Reserve will start easing monetary policy in 2024, along with rising geopolitical tensions in the Middle East.

Bullion jumped as much as 1.4 per cent to hit US$2,450.07 an ounce in Asia on May 20, surpassing a previous intraday high reached in April.

Traders have been boosting bets in recent sessions that the Fed could reduce borrowing costs as early as September, a scenario that would bolster gold as it does not pay interest.

Last week, the US dollar fell and Treasuries rallied after data released on May 15 showed that inflation in April eased more than expected.

This offered support for the precious metal, which is priced in the greenback. 

The metal’s haven status was in the spotlight on May 20 after a helicopter carrying Iranian President Ebrahim Raisi crashed in dense fog on May 19.

The news added to a sense of rising geopolitical risks across the region, after a China-bound oil tanker was hit by a Houthi missile in the Red Sea on May 19.

“Gold’s rally is news-driven with uncertainty about what happened in Iran,” said Mr Nicholas Frappell, global head of institutional markets at ABC Refinery in Sydney.

“There is bound to (be) an element of jumping to conclusions on the basis of very little information,” he said, adding that investors are “likely reluctant to fade positions given lower levels of liquidity in Asia”.

Hedge funds trading Comex futures boosted bullish bets on gold to a three-week high in the week ended May 14, according to the latest data from the Commodity Futures Trading Commission.

Spot silver rose 1.3 per cent to US$31.88 after hitting an over 11-year high, helped by spillover sentiment in wider physical metals markets, where tightening supply has spurred investor demand for materials like copper.

Unlike gold, the white metal is also considered an industrial commodity given its usage in things such as solar panels. BLOOMBERG