Gold prices have surpassed record highs set during the pandemic as expectations grow for a U.S. interest rate cut early next year, even as the Federal Reserve attempts to temper that optimism. Gold prices surged more than 3% in early trading on Monday, surpassing the all-time high set on August 7, 2020, before giving up most of the gains.
Federal Reserve Chairman Powell said on Friday that monetary policy has entered a restrictive zone, causing the dollar and U.S. bond yields to plummet. Gold prices, which have been rising since early October, gained strength on Friday.
Powell tried to pour cold water on interest rate cut optimism at the time, warning that "it is too early to conclude that we have achieved a sufficiently restrictive stance or to speculate on when policy might be loosened," but the swaps market currently sees a roughly 60% chance of a March rate cut and is fully pricing in a May rate cut.
Gold prices rose 1% to $2,093.55 an ounce as of 8:52 Singapore time, after rising 1.8% on Friday. The Bloomberg Dollar Spot Index stabilized. Silver prices rise.
Gold prices are up about 16% from their early October lows. Gold has benefited from a surge of safe-haven buying following Hamas' attack on Israel, and rising expectations of U.S. interest rate cuts have further fueled gold's gains in recent weeks. In November, the U.S. 10-year Treasury bond yield fell 60 basis points and the U.S. dollar index fell nearly 3%, both of which helped gold prices rise.