Against the backdrop of weak US economic data and market expectations for a Fed rate cut next year, international precious metal prices continue to rise, with gold hitting a new all-time high on Monday morning.
Surpassing $2150!
On Monday morning, COMEX gold futures briefly surpassed the $2150/ounce mark, while spot gold rose to $2144/ounce, both reaching new historical highs.
As of writing, the gains in gold have narrowed slightly, with COMEX futures trading at $2110/ounce, up 1.01%; spot gold falling to $2091/ounce but still up 0.92% intraday.
In addition to gold, other precious metals have also risen: COMEX silver is trading at $26.06/ounce, up 0.79%, approaching a six-month high; NYMEX platinum is trading at $946/ounce, up 1.06%, nearing a one-year high; NYMEX palladium is up 0.55%, trading at $1016/ounce.
Fed rate cuts are the main driver
The biggest driver behind the rise in gold prices is Federal Reserve Chairman Powell. Last Friday, Powell attempted to downplay market expectations for rate cuts in his speech but instead further strengthened Wall Street’s expectations for easing monetary policy.
Powell warned in his speech that it may still be premature to conclude that they have reached an appropriate restrictive stance or speculate when policy might be relaxed… “If circumstances warrant it,” he said,” we are prepared to tighten policy further.”
However,the market did not buy into this view.Exchange-traded contract markets show that prior to Powell’s speech,the expectation of the first rate cut before March next year was only around 30%. After his speech,this expectation increased to over 60%.
CME FedWatch Tool shows that currently there is about an approximately85% probability of a rate cut by May next year, and about a 70% probability of a rate cut by March next year.
After Powell’s speech last Friday, COMEX futures hit an all-time high. On Monday this week, gold prices continued to rise, once again reaching new historical highs.
Multiple factors support the upward trend in gold
This round of rising gold prices began at the end of September.
Previously, due to expectations of rising long-term interest rates,gold prices were under pressure. However, after the outbreak of conflict between Israel and Palestine in early October,gold prices rebounded and triggered a wave of safe-haven buying. Subsequently, with the decline in the US dollar and US Treasury yields,gold prices received further support.
With recent US economic data showing that the US economy is cooling down,and people’s expectations for a rapid shift towards rate cuts by the Federal Reserve next year being consolidated,gold prices have continued to strengthen.
Investment professionals point out that based on price models comparing gold prices with the history of the US dollar and US Treasury bonds,the current gold price still has significant premiums. For most of the past year,due to record purchases by central banks around the world,this premium state has been sustained.
One major adverse factor currently facing gold is continuous net outflows from gold ETFs.However,in recent weeks,the holdings of gold ETFs have shown signs of stabilization.This also helps alleviate selling pressure on gold.