Gold futures posted their largest one-day gain in more than two years on Thursday to settled above $1,800 an ounce for the first time in nearly four months.
Prices for the precious metal got a boost as the U.S. dollar and Treasury yields extended a retreat following remarks a day earlier by Federal Reserve Chairman Jerome Powell indicating policy makers would likely deliver a smaller interest rate increase this month.
Gold for February delivery
rose $55.30, or 3.1%, to settle at $1,815.20 an ounce on Comex. Most-active gold futures saw their biggest one-day point and percentage gain since April 2020 and settled at their highest since Aug. 12, according to Dow Jones Market Data. Prices had already marked a November gain of more than 7%
rose $1.06, or 4.9%, to $22.841 an ounce, after posting a monthly rise of nearly 14%.
was up 1.5% at $1,054.90 an ounce, while March palladium
rose 4.3% to $1,946.30 an ounce.
rose 2.1% to $3.8175 a pound.
Federal Reserve Chairman Jerome Powell indicated Wednesday the central bank may decide to raise interest rates at a slower pace at its next policy meeting. Treasurys rallied, pulling down yields, while the dollar retreated.
Traders believe that “an era of aggressive interest rate hikes is over, and only smaller rate hikes will be taking place.” said Naeem Aslam, chief market analyst at AvaTrade, in a market update.
Treasury yields continued to pullback in Thursday dealings, while the ICE U.S. Dollar Index
a measure of the currency against a basket of six major rivals, was down 1.1%.
“Gold likes the combination of lower interest rates and a weaker dollar,” said Marc Chandler, chief market strategist at Bannockburn Global Forex, in a note.
Lower yields lower the opportunity cost of holding non-yielding assets like gold, while a lower dollar makes commodities priced in the unit less expensive to users of other currencies.
U.S. data on Thursday showed the Federal Reserve’s favorite inflation gauge rose a modest 0.3% in October, adding another piece of evidence that points to slowly easing price pressures. The yearly rate of inflation slowed to 6% in October from 6.2% in the prior month and a 40-year high of 7% last summer.
Core PCE coming in at 0.2% versus forecasts for 0.3% is “a very positive step that inflation could have peaked,” Jeff Wright, chief investment officer at Wolfpack Capital, told MarketWatch, adding that personal income data came in at 0.8% — “right at the estimate.”
“Both of these data points show high a inflationary environment but moderation in the former trend,” he said. The trend is important for U.S. Treasurys, the U.S. dollar, and then gold, as the data impacts all three, he said.
Still, “a lot of the interest in gold is short term and sudden gains can evaporate with larger capital taking profits before year end,” Wright said.
If the trend holds through January, then “gold will participate with the U.S. equities Santa Claus rally,” he said.
Longer term and into 2023, “I do not like how gold sets up as interest rate increases are only moderating in the pace and I do not believe this is a pivot towards less restrictive monetary policy,” Wright said. “So short term positive for gold, medium term neutral and longer term not good in my opinion. For gold, it all comes down to view on interest rates, U.S. dollar and timing.”