Gold sprints to record high as Fed sticks to 2024 rate-cut view

Gold prices climbed to a record high on Thursday, as the U.S. dollar and bond yields ticked lower after the Federal Reserve maintained its projection of three rate cuts for this year.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

Spot gold was up 0.8% at $2,203.09 per ounce, as of 0457 GMT, after hitting an all-time high of $2,222.39 earlier in the session. U.S. gold futures jumped 2.1% to $2,205.40.

The Fed held interest rates steady on Wednesday, but policymakers indicated they still expected to reduce them by three quarters of a percentage point by the end of 2024.

Fed Chair Jerome Powell said recent high inflation rate readings had not changed the underlying "story" of slowly easing price pressures in the United States.

"It's the goldilocks scenario for gold prices, where marginally higher inflation expectations meet lower nominal rates to create decreased real yields," said Kyle Rodda, a financial market analyst at Capital.com.

"A dovish Fed, a little squeeze on existing shorts, and a touch of momentum chasing have boosted bullishness in the gold market."

Fed funds futures traders are now pricing in a 75% probability that the Fed will begin cutting rates in June, up from 59% on Tuesday, according to the CME Group's FedWatch Tool.

"With Powell keeping three potential rate cuts in play this year, bond yields and the USD dipped, which opened a pathway higher for the gold price," Tim Waterer, chief market analyst at KCM Trade, said in a note.

The dollar slipped to a one-week low against its rivals, while benchmark U.S. 10-year Treasury yields also dipped.

Spot gold may retest resistance at $2,222 per ounce, a break above which could lead to a gain into $2,228-$2,234 range, according to Reuters' technical analyst Wang Tao.

Spot silver was steady at $25.63 per ounce, platinum rose 1.2% to $917.60 and palladium climbed 1.2% to $1,033.56.

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