Gold Futures Settle At Over 1-year High

Gold prices surged higher on Thursday as the dollar remained quite subdued amid indications the Fed is nearing the end of its tightening cycle.

The latest projections suggest the Fed plans just one more quarter-point rate hike this year, with CME Group’s FedWatch Tool currently showing a roughly 50-50 chance the increase will come in May.

Even if the Fed raises rates again at its next meeting, traders may take some comfort in knowing officials feel a range of 5.0 to 5.25% will be the so-called “terminal rate.”

The dollar index, which dropped to 101.92 in the Asian session, rose to 102.50 in early New York session before turning easy again. The index is currently at 102.31, down slightly from the previous close.

Gold futures for April ended higher by $46.30 or about 2.4% at $1,995.90 an ounce, the highest settlement since early March 2022.

Silver futures for May ended up $0.470 at $23.256 an ounce, while Copper futures for May settled at $4.1235 per pound, gaining $0.0790.

“Gold is becoming a favorite trade on Wall Street as many traders remain nervous post-Fed and over how quickly will US authorities be able to contain further banking turmoil,” says Edward Moya, Senior Market Analyst at OANDA.

“Gold is rising after jobless claims reminded traders that the labor market is still tight, complicating a growing number of Fed rate cut bets. Gold is going to shine here and it seems positioned to find a home above the $2000 level,” adds Moya.

In U.S. economic news, a report released by the Labor Department showed initial jobless claims slipped to 191,000 in the week ended March 18th, a decrease of 1,000 from the previous week’s unrevised level of 192,000. Economists had expected jobless claims to rise to 201,000.

The report said the less volatile four-week moving average also edged down to 196,250, a decrease of 250 from the previous week’s unrevised average of 196,500.

Data released by the Commerce Department showed new home sales in the U.S. climbed by 1.1% to an annual rate of 640,000 in February after jumping by 1.8% to a downwardly revised rate of 633,000 in January.

Economists had expected new home sales to pull back to an annual rate of 645,000 from the 670,000 originally reported for the previous month.

Following the Fed’s interest rate move on Wednesday, Swiss National Bank and the Bank of England today raised their respective interest rates to fight inflation.

Despite recent turblence in the banking industry, the SNB raised its policy rate by 0.5 percentage points to 1.50%. The outcome of the meeting was in line with expectations.

Further, the bank said it cannot be ruled out that additional policy rate hikes will be necessary to ensure price stability over the medium term.

The Bank of England hiked its key interest rate for the eleventh consecutive session on Thursday as an unexpected rise in inflation compelled policymakers to ignore the banking sector turmoil.

The nine-member Monetary Policy Committee decided to lift the bank rate by 25 basis points to 4.25%. This was the highest rate since 2008. In the current tightening cycle that began in December 2021, the rate was raised by 415 basis points.

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