Get 40% Off
💰 Buffett reveals a $6.7B stake in Chubb. Copy the full portfolio for FREE with InvestingPro’s Stock Ideas toolCopy Portfolios

Spot gold prices hit record high as Fed signals potential pause

Published 05/03/2023, 08:22 PM
Updated 05/03/2023, 08:32 PM
© Reuters.
- -- Gold prices extended recent gains on Thursday, briefly touching a record high after the Federal Reserve hiked interest rates but flagged a more stringent approach to raising rates further amid worsening economic conditions.

Spot gold rose 0.9% to $2,056.24 an ounce in early trade on Thursday, after rising to a record high of $2,080.72 an ounce late-Wednesday. Gold futures rose 1.3% to $2,064.15 an ounce, and were trading just below a 2020 record high of $2,089.20 an ounce.

The yellow metal benefited from increased safe haven demand as Fed Chair Jerome Powell warned that economic growth was cooling, and that credit conditions were likely to tighten further amid growing pressure on U.S. banks.

This was accompanied by an extended rout in U.S. bank stocks, as the collapse of First Republic Bank (NYSE:FRC) earlier this week sparked resurgent fears of a U.S. banking crisis.

Media reports said that regional lender PacWest Bancorp (NASDAQ:PACW) was considering a sale amid worsening market conditions, suggesting that it could be the next domino to fall in the worst U.S. banking collapse since 2008.

Powell also signaled that the Fed was close to hitting peak interest rates, and that the bank will largely adopt a more data-driven, “meeting-by-meeting” approach to future rate decisions. The Fed hiked rates by 25 basis points on Wednesday, putting them at their highest level in 16 years.

While this could yet result in more rate hikes, given that U.S. inflation is still trending well above the Fed’s target range, analysts opined that worsening economic conditions in the country will elicit a pause in the rate hike cycle.

3rd party Ad. Not an offer or recommendation by See disclosure here or remove ads .

“With lending conditions rapidly tightening in the wake of recent bank stresses, we think this will mark the peak for interest rates with recessionary forces set to prompt interest rate cuts later this year,” analysts at ING wrote in a note.

A pause in future rate hikes and a potential U.S. recession present a bullish case for gold, as investors seek safe haven in the yellow metal. The dollar also retreated after the Fed’s statement, as did U.S. Treasury yields.

Other precious metals also advanced on Thursday. Silver futures jumped 1.5%, while platinum futures added 0.4%.

Among industrial metals, copper prices saw some relief from a weaker dollar. But they were trading lower for the week amid growing fears that worsening economic growth will greatly crimp demand for the red metal.

Copper futures rose 0.2% to $3.8563 a pound. A Reuters poll showed that the red metal could be due for some gains in the coming months, but weak economic conditions, particularly in China, could limit any major upside.

Latest comments

beware of gold..after 2nd quarter make sudden death by july head south back to 1800 - 1700
I wish.. I'd be buying big for sure
The inflation rate may not be paused but when it becomes hyper inflation (unbearable so to say), it will stop rising.
They are not going to pause until the inflation comes down to at least 3%. You can only fool unprofessional readers with such imaginary dovish Fed.
Stale rate pause manipulative news again ......
I can't find anything about a potential pause in the Fed statement nor did I hear Powell emphasize that at all.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.