Inflation and rate cut expectations drive gold prices higher, according to TD Securities: Q2 may easily break through $2,300
Gold prices rose by 0.7% on Monday, driven by expectations of a rate cut by the Federal Reserve. The closing price of the New York Mercantile Exchange's March gold futures contract was $2,174.80 per ounce, the fifth highest closing price in history. Federal Reserve officials have expressed caution about rate cuts, with the Chicago Fed President expecting three rate cuts this year while the Atlanta Fed President expects only one. Gold, as a hedge against inflation, has seen price increases this year, with lingering concerns in the market about inflation. Investors are worried about the level of U.S. government debt. Major central banks are lowering interest rates, fueling expectations of rate cuts. Gold remains attractive, driven by various factors
According to the Wisdom Financial APP, the gold futures for March delivery on the New York Mercantile Exchange closed up 0.7% at $2,174.80 per ounce, marking the third increase in the past four trading days and the fifth highest closing price in history, just 0.35% lower than the 52-week high of $2,182.50 set on March 11. It is reported that the rise in gold prices on Monday was mainly driven by expectations of a possible interest rate cut by the Federal Reserve this year, but the closing price did not reach the intraday high.
On Monday, Federal Reserve officials made intensive statements, with one official expressing caution about an interest rate cut. Last week, the FOMC decided for the fifth consecutive time to keep interest rates unchanged and stated that it is closely monitoring inflation to see if it is on a sustainable path to reach the Fed's 2% target.
Chicago Fed President Charles Evans said he expects three rate cuts this year. In an interview, Evans pointed out that his view is consistent with the median forecast released after the Fed's March 19-20 meeting. In that forecast, ten officials expected at least three rate cuts this year, while nine others predicted two or fewer.
Meanwhile, Atlanta Fed President Raphael Bostic reiterated his expectation of only one rate cut this year, adding that as long as the economic conditions are good, the central bank can afford to be patient. Federal Reserve Governor Lael Brainard also stated that the central bank must cut rates cautiously to allow more time for inflation to slow in certain areas of the economy.
However, according to Kathleen Brooks, research director at XTB, gold's status as a hedge against inflation has supported the price increase so far this year. With major central banks preparing to lower interest rates, ongoing concerns about inflation should continue to support gold prices.
Analysts at SP Angel stated that gold is becoming increasingly attractive, driven by various factors including reports of continued gold purchases by China and other central banks, recent interest rate adjustments by Japan, Turkey, and other central banks, as well as market expectations of a rate cut in the United States. In addition, investors remain concerned about the high level of U.S. government debt.
Furthermore, Bart Malek, Head of Commodity Strategy at TD Securities, believes that gold prices could easily reach $2,300 or higher in the second quarter. He stated that once the rate cut is confirmed, independent traders and ETF investors who have not strongly participated in the uptrend so far will enter the market.
However, Malek also mentioned that stronger economic data could cause gold prices to fall.
Meanwhile, silver ended a five-day losing streak, with the silver futures contract for March delivery closing up 0.2% at $24.745 per ounce.
Related ETFs include: SPDR® Gold Shares ETF (GLD.US), VanEck Gold Miners ETF (GDX.US), VanEck Junior Gold Miners ETF (GDXJ.US), iShares Gold Trust ETF (IAU.US), Direxion Daily Gold Miners Index Bull 2X Shares ETF (NUGT.US) Sprott Physical Gold Trust (PHYS.US), SPDR® Gold MiniShares ETF (GLDM.US), Goldman Sachs Physical Gold ETF (AAAU.US), abrdn Physical Gold Shares ETF (SGOL.US), GraniteShares Gold Trust ETF (BAR.US), iShares Silver Trust ETF (SLV.US), Sprott Physical Silver Trust (PSLV.US), abrdn Physical Silver Shares ETF (SIVR.US), Amplify Junior Silver Miners ETF (SILJ.US)
It is worth mentioning that the price of Bitcoin, also known as "digital gold", has once again risen above $70,000, with a daily increase of 7.34%. It is reported that nearly $900 million was withdrawn from these ETFs last week, reflecting the continuous outflow of funds from the Grayscale Bitcoin Trust, as well as a slowdown in subscriptions to products from BlackRock and Fidelity.
These 10 funds experienced their worst week since their establishment in January this year. Nathanaël Cohen, co-founder of the digital asset hedge fund INDIGO Fund, stated: "Despite the drag on ETF inflows, the buying orders around $60,000 are still high, indicating a market eagerness to buy on dips."
The new demand for Bitcoin ETFs is the main driving force behind the historic rebound of Bitcoin this year. However, the large-scale outflow of funds last week triggered more hedging by traders against price declines, as well as a significant liquidation of leveraged long positions in the cryptocurrency futures market