Gold surges to high but risk of short-term pull back


THE gold price surged to its highest level since the Covid pandemic amid growing expectations for US rate cuts early next year. This was despite attempts by the Federal Reserve to temper the optimism, said Bloomberg News.

The newswire said a rally in bullion that’s been underway since early October was turbocharged on Friday when comments by Federal Reserve chair Jerome Powell that monetary policy is “well into restrictive territory” spurred a plunge in the dollar and Treasury yields, a positive for non-interesting bearing gold.

Powell then attempted to push back against the rate-cut optimism, warning that “it would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease.”

Gold was last trading at $2,073.65 per ounce. The rand gold price was R1.25m per kilogram, a new all-time high for South African producers of the metal. Shares in AngloGold Ashanti and Pan African Resources rose 3.48% and 2.66% respectively in the first two hours of trade in Johannesburg.

However, there could be a risk of a price correction. Gold’s gain looks like it was “more driven by stop-loss orders,” Kelvin Wong, a senior market analyst at Oanda Asia Pacific told Bloomberg News. There could be a risk of a pullback toward the $2,000 to $2,030 an ounce level in the short term, he told the newswire.

The precious metal is trading at a hefty premium to models of its price based on its historic relationship with the dollar and Treasuries, said Bloomberg News. That dynamic has persisted for most of the past year, driven by record buying by central banks, which helped bullion weather persistent outflows by gold-backed exchange traded funds, it said.