© Reuters. File photo: An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File photo
By Sherin Elizabeth Varghese
(Reuters) – Gold stood tall near previous session’s record highs on Wednesday as markets expect Federal Reserve Chair Jerome Powell’s testimony later in the day to reveal clues on a potential June rate cut.
Spot gold was steady at $2,126.75 per ounce, as of 1107 GMT after hitting a historic high of $2,141.59 per ounce in the prior session. U.S. fell 0.3% to $2,135.20.
Bullion has powered to record highs in other major currencies as well.
Increasing expectations of interest rate cuts, which boost the appeal of non-yielding bullion, following weaker U.S. economic data recently, and fears of an imminent correction in stock markets have led to strong demand for alternative asset classes such as bitcoin and gold, said Commerzbank (ETR:) analyst Carsten Fritsch. [MKTS/GLOB]
Along with the bullion, the world’s largest cryptocurrency, bitcoin also touched a record high on Tuesday before retreating sharply.
Tuesday’s rally pushed ‘s 14-day relative strength index to 78, much above the ‘overbought’ levels at 70.
“We think the gold price has run too far in the short term and expect a correction. U.S. labor market data on Friday could put a damper on rate cut hopes,” Fritsch said.
Traders see a 69% chance for a June Fed rate cut.
Investors focus is also on Powell’s first day of semi-annual congressional testimony on the state of the U.S. economy amidst an environment of elevated interest rates.
“We expect Powell to suggest that rate cuts may be delayed but likely to start in 2024,” UBS said in a note.
“With a mid-year Fed rate cut as our base case, we forecast spot gold will rise to $2,250/oz by end-2024 alongside central bank buying, demand from China, and an expected revival in demand for gold exchange-traded funds.”
In other metals, spot silver rose 0.1% to $23.70. Platinum was up 0.9% to $888.38 per ounce, and palladium gained over 1% to $958.93.
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