Gold Rises To All-Time Highs: Marks Longest Winning Streak Since July 2000 Driven By Rate Cut Anticipation

VanEck Vectors Gold Miners ETF -2.00%
SPDR Gold -1.32%

VanEck Vectors Gold Miners ETF

GDX

33.76

-2.00%

SPDR Gold

GLD

216.89

-1.32%

Gold prices extended their winning streak for the eighth consecutive session, surging past the $2,170 per troy ounce threshold and reaching a new pinnacle. This current rally in gold represents its longest winning streak in almost four years, harking back to July 2000 when it logged nine straight sessions of gains.

The surge in gold prices has been underpinned by traders’ solidifying expectations of imminent interest rate cuts, following benign economic data and reassuring remarks from Fed Chair Jerome Powell.

In response to this move, gold miners, as monitored through the VanEck Gold Miners ETF (NYSE:GDX), notched a 9% increase this week, their best weekly performance in a year.

Chart: Gold Prices Notched Eight Straight Sessions Of Gains, Longest Streak In Four Years

US Economic Data, Powell’s Remarks Cemented Rate Cut Bets

The uptick in gold began in late February following a Personal Consumption Expenditure (PCE) price index report that met expectations. The Federal Reserve’s favored gauge of inflation dropped to a 2.4% year-on-year rate in January, in line with forecasts and marking the lowest level since February 2021.

Weaker-than-expected reports on manufacturing and services activity from the Institute for Supply Management (ISM) in February suggested the potential of slower U.S. economic growth in the first quarter of 2024 compared to the robust data seen in the second half of 2023.

Federal Reserve Chair Jerome Powell‘s testimony before a Senate committee this week hinted at a likely initiation of interest rate reductions “at some point this year,” emphasizing the central bank’s cautious approach towards inflation reaching the 2% target.

Market participants interpreted Powell’s remarks as signaling that continued disinflationary progress would provide the green light for the Federal Reserve to ease monetary policy.

Responding swiftly, speculators increased their bets on interest rate cuts following Powell’s remarks, with market-implied probabilities now screening an 83% chance of a rate cut by June. In total, traders are factoring in four rate cuts by the end of the year.

The latest February jobs report revealed mixed results, with nonfarm payrolls exceeding expectations (270,000 versus 200,000), but the unemployment rate unexpectedly rising from 3.7% to 3.9%, and wage growth decelerating more than anticipated.

These data releases stirred uncertainties in the stock market while keeping Treasury yields at monthly lows, fostering a positive environment for gold.

Gold, as tracked by the SPDR Gold Trust (NYSE:GLD), hit record highs this week, surging past $2,150 per ounce and sustaining its momentum on Thursday and Friday.

Chart: Gold Miners Rally On Gold Price Surge, Mark Best Week In A Year

Gold 2024 Outlook Looks Bright

ING Groep’s commodity analyst Ewa Manthey underscored the supportive fundamentals for gold. The precious metal has maintained its position above the critical $2,000 per ounce mark since December.

“Investors' interest in the precious metal finally returned, with the latest Comex data showing money managers adding fresh long positions, reflecting bullish sentiment in the gold market,” Manthey wrote.

Looking ahead, the analyst anticipates further long positions being added as gold prices climb amid falling U.S. interest rates.

ING forecasts are for gold prices to ascend this year as safe-haven demand persists amid geopolitical uncertainties stemming from ongoing conflicts and the upcoming U.S. election.

Read now: Gold Shines Brighter Than AI-Driven Semiconductor Stocks: 7 Mining Stocks To Watch With The Ore At Record Highs

Photo: Shutterstock

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