Onome Amuge
Gold prices advanced on Friday, putting the metal on course for a fifth consecutive weekly gain, as investors weighed the Federal Reserve’s first interest rate cut of the year against lingering concerns about inflation.
Spot gold rose 0.7 per cent to $3,669.19 per ounce, taking its weekly gain to the same level. US gold futures for December delivery also climbed 0.7 per cent to $3,702.30. The moves extend a rally that has lifted the metal nearly 40 per cent so far this year, fuelled by expectations of looser monetary policy and a flight to haven assets.
The US central bank lowered its benchmark rate by 25 basis points on Wednesday, while warning that persistent inflationary pressures could limit the speed of future reductions. The decision sent bullion to a record $3,707.40 before volatile trading pared gains.
“Gold remains pretty strong here and is just seeing a pause after the Fed. The bullish trend remains intact with new highs inevitable and realistically we could see $4,000 before year-end,”said Bob Haberkorn, market strategist at RJO Futures.
Fed policymakers have signalled further easing could follow. Neel Kashkari, president of the Minneapolis Fed, said risks in the labour market justified this week’s cut and argued for additional reductions at the next two meetings. Lower rates reduce the opportunity cost of holding non-yielding assets such as gold, bolstering investor appetite.
The rally has reverberated in physical markets. Indian gold premiums rose to a 10-month high this week as buyers shrugged off record prices ahead of the autumn festival season. In contrast, discounts in China widened to a five-year peak, reflecting weaker demand in the world’s biggest consumer market.
Other precious metals also moved higher. Silver rose 2.1 per cent to $42.67 per ounce, while platinum added 1.3 per cent to $1,401.40. Palladium slipped 0.6 per cent to $1,143.07,a weekly decline.
