Spot Gold registered a fresh all-time high of $2,222.91 per oz. on Thursday, as the US Dollar and Treasury yields edged lower after the Federal Reserve signaled three rate cuts before year-end.
The Fed left its federal funds rate target range without change at a 23-year high of 5.25%-5.50% for the fifth straight policy meeting in March, as largely expected.
Yet, Fed policy makers signaled they expected to cut interest rates by three quarters of a percentage point by the end of the year.
Federal Reserve Chair Jerome Powell said the latest high inflation readings had not altered the underlying “story” of slowly easing price pressures.
“It’s the goldilocks scenario for gold prices, where marginally higher inflation expectations meet lower nominal rates to create decreased real yields,” Kyle Rodda, financial market analyst at Capital.com, was quoted as saying by Reuters.
“A dovish Fed, a little squeeze on existing shorts, and a touch of momentum chasing have boosted bullishness in the gold market.”
Markets are now pricing in about a 75% chance of a Fed rate cut occurring in June, compared with 59% on Tuesday, according to the CME FedWatch tool.
Lower interest rates reduce the opportunity cost of holding Gold, which pays no interest.
Meanwhile, the Fed’s PCE inflation forecast for 2024 was kept unchanged at 2.4%, but the 2025 projection was revised up to 2.2% from 2.1%, as forecast in December.
The central bank’s core PCE inflation forecast for this year was revised up to 2.6% from 2.4% in the December projection.
As of 7:42 GMT on Thursday Spot Gold was gaining 1.00% to trade at $2,208.32 per troy ounce.
The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging down 0.10% to 103.278 on Thursday.
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