Gold investors can breathe a sigh of relief as the U.S. Federal Reserve indicated its commitment to reducing interest rates three times this year. This has sparked renewed buying momentum in the market.
On Thursday morning, gold prices in the UAE surged to a new all-time high, with an increase of AED5 per gram at market opening. According to data from the Dubai Jewellery Group, the 24K variant of gold was trading at AED266.75 per gram, compared to AED261.75 at the previous day’s market close, representing a AED5 per gram rise. Other variants of gold also saw gains, with 22K opening at AED247 per gram, 21K at AED239, and 18K at AED205
On Wednesday, the highly anticipated announcement from the Fed revealed that it would maintain the Fed interest rate within a range of 5.25 percent to 5.50 percent. However, the focus of the markets shifted towards the central bank’s forward guidance on interest rates for the rest of the year.
The gold market experienced a surge as market participants began solidifying their expectations of a rate cut in June. According to the CME FedWatch Tool, the probability of a rate cut in June is now over 60 percent, surpassing the 50/50 chance that was priced in prior to the announcement.
Read more: U.S. Federal Reserve keeps interest rates unchanged
Fed cautious on timing of rate cuts, optimistic about economy
The central bank’s updated interest rate projection, known as the “dot plot,” shows that the committee expects the Fed Funds rate to remain unchanged at 4.6 percent by the end of the year, aligning with the forecast from December.
Prior to the announcement, the gold market was trading in a relatively neutral position but reacted positively, pushing prices into the upward territory. Currently, spot gold prices are at $2,1673.60 per ounce, reflecting a 0.77 percent increase for the day.
While the central bank continues to signal future rate cuts, it remains hesitant to provide specific timing. The monetary policy statement conveyed a highly optimistic outlook on the overall health of the economy.
Copper rally resumes, PMI in focus
The price of copper futures on the London Metal Exchange for the three-month period increased by 0.6 percent to reach $9,053.50 per ton. Additionally, one-month copper futures in the U.S. saw a 0.4 percent rise, reaching $4.1078 per pound. These prices were near the highest levels witnessed in the past eleven months earlier in the week.
The current focus is on a series of crucial purchasing managers index (PMI) readings scheduled to be released in the upcoming days. These readings, originating from major economies, are expected to provide further insights into the trajectory of copper demand.
The surge in copper prices this month can be attributed to the possibility of supply disruptions caused by production reductions implemented by China’s largest copper refiners.
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