Onome Amuge

Gold eased on Thursday as investors booked profits following a record-breaking rally in the previous session, with traders digesting the US Federal Reserve’s cautious signal on the pace of future interest rate cuts.

Spot gold fell 0.6 per cent to $3,638.33 per ounce, while US gold futures for December delivery dropped 1.3 per cent to $3,670.40. The declines came after a volatile session on Wednesday, when spot prices briefly hit an all-time high of $3,707.40 before retreating.

The Fed delivered its first rate cut since December, lowering borrowing costs by a quarter-point, and indicated further easing was possible. But chair Jay Powell described the move as a risk-management step to shore up a weakening labour market, while stressing that policymakers remained alert to persistent inflation pressures.

“There was some confusion around Powell’s comment about the rate cut being a risk-management measure, and that uncertainty prompted profit-taking. But I do think gold’s long-term bullish trend still remains, and the setback from yesterday’s all-time high is corrective in nature. Every time gold makes a new high, it just lends additional credence to the $4,000 objective,”said Peter Grant, vice-president and senior metals strategist at Zaner Metals. 

The yellow metal, which offers no yield but benefits in low interest rate environments and times of economic uncertainty, has gained nearly 39 per cent so far this year.

Analysts at SP Angel said in a note that reserve diversification by central banks from the BRIC economies, led by China, remained the primary driver behind gold’s strength. “This trend is expected to continue, supporting gold prices, whilst a lower dollar is also expected to provide a sustained tailwind,” they added.

Despite Thursday’s pullback, traders said gold’s broader momentum remained intact as central bank demand, inflation concerns and expectations of looser US monetary policy continue to underpin the market.