Gold Breaks $5,500, Investors Monitor Fed Policy Shift
Gold prices surged to a new record above $5,500 per ounce, extending a rapid rally driven by a combination of monetary easing expectations and a flight of funds from government bonds and currencies. Bullion briefly surged as much as 4.6%, as markets began to “read” that a new monetary leader at the Federal Reserve by the end of the year could usher in a more dovish policy direction.
This surge occurred despite the Fed holding interest rates on hold on Wednesday and signaling a more cautious approach to future policy adjustments. However, market participants appear to have looked beyond this meeting—the focus is no longer just on the current decision, but on who will lead the Fed next and what their policy style will be.
“The market is looking beyond Powell. The next chairman could be much more dovish,” said Bart Melek, global head of commodity strategy at TD Securities. He believes the choice of Fed chairman will be a key factor in determining gold’s performance throughout the year, as the precious metal typically benefits most when interest rates are trending downward.
One name that's increasingly being mentioned is Rick Rieder of BlackRock. This Wall Street veteran is seen as bringing a more "market-driven" approach. He has advocated for more aggressive interest rate cuts and criticized the Fed's policy communications for overly locking expectations—things that, if reflected in policy, could fuel gold, as a low-interest-rate environment benefits non-yielding assets.
Beyond the Fed's narrative, gold demand is also fueled by rising geopolitical risks, a weakening dollar, and investors' tendency to reduce exposure to currencies and government bonds. Gold has risen about 25% so far this year and just broke through $5,000 this week. Over the same period, silver has surged about 63%. A major selloff in the Japanese bond market has added to concerns about fiscal spending, while speculation of intervention to contain the yen has also put pressure on the dollar, making gold relatively cheaper for global buyers.
Standard Chartered believes the combination of expectations for a more dovish—and even perceived less independent—Fed and geopolitical risks could accelerate allocations to gold, particularly from retail investors. "Barring a short-term correction, we still see risks of further upside," wrote Suki Cooper, the bank's global head of commodity research. (alg)
Source: Newsmaker.id
