By Joe Hoppe
Gold prices hit new highs at the start of the week, with momentum chiefly driven by central bank purchases.
June futures on the New York Mercantile Exchange were recently up 0.5% at $2,357 a troy ounce, having hit a new all-time high of $2,372.5 earlier in the session. They have gained 4.4% over the last week and nearly 11% over the last year.
For several weeks the main driver of the rally has been expectations that the U.S. Federal Reserve will cut interest rates up to three times in 2024. However, Friday's U.S. Nonfarm Payroll inflation data put a dent in those hopes, coming in hotter than expected for the fifth time in a row.
But gold continues to rise, decoupling from its traditionally tight relationship with rising U.S. Treasuries, broker SP Angel said in a note. Instead, central bank buying has been the main driver; China's central bank added gold to its reserves for the 17th month in a row in March.
"Despite easing geopolitical tensions in Gaza and reduced expectations of a rate cut by the U.S. Federal Reserve in June, gold prices are likely to continue their record rise primarily due to reports of potential strong purchases of gold by global central banks," said Rania Gule, market analyst at global broker XS.com in a note.
Data suggests systematic commodity trading advisors--or momentum-based algorithmic funds--have also been ramping up purchases, with overall futures trading jumping, SP Angel added.
Write to Joe Hoppe at joseph.hoppe@wsj.com
(END) Dow Jones Newswires
04-08-24 0813ET
