Gold Hits Record High Amid Rate Cut Expectations
Gold’s Rally and Palladium’s Surge
Gold reached a new all-time high on Wednesday, driven by expectations of U.S. monetary easing. Palladium also soared above $1,000 for the first time since January 12. Gold climbed 0.6% to $2,139.39 per ounce, hitting a peak of $2,148.99 earlier in the day. Meanwhile, U.S. gold rose 0.3% to $2,147.60, and silver added 1.2% to reach $23.97.
Market Response and Future Predictions
The dollar’s decline after Fed Chair Jerome Powell hinted at a potential rate cut later this year further boosted gold prices. Gold typically suffers when U.S. interest rates rise, increasing returns on other assets like bonds and strengthening the dollar. Analysts suggest that macro data and expectations of Fed policy changes have significantly influenced the gold market, surpassing long-term fair value models’ predictions. Traders are now speculating a 70% likelihood of a June Fed rate cut.
Current Trends and Analyst Insights
CTAs are increasingly investing in gold, with funds holding around 80% of their historic maximum long position, according to senior commodity strategists. Platinum and palladium have also seen notable gains, with palladium attracting significant buying interest from funds, particularly in the auto sector. The rise in palladium prices may be attributed to reduced demand for electric vehicles, offering a potential boost to the market.
Challenges in the Market
Palladium’s demand from the auto sector, which accounts for 80% of its total demand, faced a decline in 2023 due to the substitution of cheaper platinum in autocatalysts. This shift aimed at curbing emissions and aligning with the rising market share of electric vehicles, presenting challenges for palladium’s future growth.
