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Monday February 26, 2024

Gold surges to record highs before pulling back

Gold's rise was largely propelled by speculations fueled by Federal Reserve Chair Jerome Powell's comments on Friday hinting at potential rate cuts

By Web Desk
December 05, 2023
A trader displays gold bangles at a jeweller shop in this undated photo. —  AFP file
A trader displays gold bangles at a jeweller shop in this undated photo. —  AFP file

Gold prices increased dramatically on Monday, surging beyond expectations to reach an all-time high of $2,135.39 per ounce, beating the previous record of August 2020.

The precious metal's climb was rapid, leaping by more than 3% in Asian markets. This monumental rise was largely propelled by speculations fueled by Federal Reserve Chair Jerome Powell's comments on Friday hinting at potential rate cuts.

The remarks of Powell were interpreted by traders as a signal for upcoming changes in Fed policy, resulting in a decline in the US dollar and Treasury yields and thereby boosting gold's appeal.

However, the enthusiasm surrounding the sharp increase in gold value proved short-lived. The surge took an unexpected turn at midday in New York, when gold prices fell 2.2% to $2,023.67 an ounce.

The US dollar, which had taken a big hit earlier, bounced back quickly on Monday morning, rising 0.5%. Due to the dollar's increase in value, gold became more costly for those who held other currencies, which caused its price to drop quickly.

Investors are actively watching some important labour market indicators in advance of the Federal Reserve's upcoming actions. Several factors, including increased purchases by governments and central banks and geopolitical tensions, have contributed to the strength of gold as a commodity.

Gold's appeal has also been greatly boosted by worries about inflation, which has led investors to turn to this precious metal as a hedge against future economic uncertainty.

Although gold prices have recently surged, several analysts warn that the sharp increase may have been exaggerated. Concerns have been raised regarding the durability of this increase in light of Monday's quick reversal.

Experts caution about a potential brief decline in gold prices, pointing to a strong increase earlier in the week that appeared to be mostly caused by stop-loss orders. However, given the sharp increase in gold prices over the past few months, those who entered the market later would look for chances to invest, which might lead to additional rallies. In Asian markets, the price of the precious metal rose by more than 3%, mostly as a result of conjecture stoked by Federal Reserve Chair Jerome Powell's