Gold Takes a Breather After a Wave of Record Highs

Gold prices reached a record high globally on Thursday as Federal Reserve officials reiterated their expectations for rate cuts in 2024, albeit with the timing uncertain, while traders await key US jobs data.

Federal Reserve officials, including US central bank chief Jerome Powell, on Wednesday continued to emphasize the need for further discussion and data before cutting rates, a move that financial markets expect to happen in June.

Meanwhile, US services industry growth slowed further in March, boding well for inflation expectations. The US March jobs report is due out on Friday, with new inflation data next week.

Gold and the Dollar Now

Gold futures are now flat at $2315 an ounce. Spot gold is down about 0.18% to $2296 an ounce. It hit a record high of $2304.09 earlier in the session. On the other hand, the dollar index is flat at 103.975 points.

Other Metals

Silver fell 0.5% in spot trading to $27.08 an ounce, platinum was down 0.1% to $935.39, and palladium rose 0.4% to $1,017.83.

Bank of America Sticks to 2024 Gold Forecast, Sees This Level

In a note published on Tuesday, commodity analysts at Bank of America, led by Michael Widmer, said gold prices are heading towards $2400 an ounce this year, as the investment bank was one of the few bullish on gold prices late last year and everything they have seen this year has only reinforced their conviction.

In December, Widmer said he expected gold to rise when the Fed starts cutting rates, and that position has changed little. “We previously forecast a $2400/oz gold price target if the Fed starts cutting rates in Q1 2024; we stick to this call for this year, even if rate cuts come later,” Widmer added in the report.

The bullish outlook from Bank of America comes as the precious metal has made significant gains in the past month, hitting record highs, with both spot and futures prices crossing the $2300 an ounce level in recent days. Despite Western investors liquidating their positions in gold-backed exchange-traded products, Widmer said demand is coming from other investment vehicles.

Meanwhile, Widmer noted that physical demand, driven by Chinese and Indian investors and central banks, will also continue to support gold prices into 2024. Widmer said the People’s Bank of China has been the leading central bank in terms of the size of gold purchases over the past period.

According to the Bank of America (NYSE:BAC) report, jewelry sales and non-monetary gold imports hit record highs earlier this year in China. This interest reflects the lack of alternative options for Chinese investors, as stock and housing markets remain particularly unattractive.Besides China, Bank of America said healthy physical demand in India, steady price premiums in regional markets such as Istanbul, Turkey, and Zurich, Switzerland, have supported gold prices globally.

Meanwhile, Widmer said Western investors are expected to return to the gold market when the Fed actually starts the new easing cycle. “If the Fed eventually starts cutting rates, investors should return to the market, which would also offset a potential decline in Chinese investment demand as sentiment improves in the Asian country and the economy recovers,” he said.

European Stocks Retreat on Tightening Comments, Geopolitical Concerns

European stocks fell to their lowest in over two weeks on Friday, tracking global peers after hawkish comments from some Federal Reserve officials and rising Middle East tensions.

The pan-European STOXX 600 index fell 1% by 0713 GMT, heading for its first weekly decline of more than 1% since mid-January. Adding to caution about market expectations for imminent rate cuts, Minneapolis Fed President Neel Kashkari said that if inflation continues to rise, there may be no need for rate cuts by the end of the year.

Optimism about rate cuts has been the main driver of gains for most developed market stocks since late 2023. Travel and leisure stocks led the sectoral declines, weighed down by a jump in Brent crude prices on supply disruption risks following rising geopolitical tensions in the Middle East.

Swiss software company SoftwareONE fell 2.3% after it said all its advisors oppose a complete overhaul of its board. Focus later on Friday will be on a key US jobs report for March.

For further insights, check OneRoyal’s Facebook, Instagram, and Twitter pages and expand your understanding of financial markets with global perspectives.  Staying informed is crucial in the ever-evolving world of finance.

Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances, or needs.

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