Gold Soars Above $2400 Despite Diminishing Fed Rate-Cut Hopes

Gold futures surged higher today, with the most active June contract reaching an intraday peak of $2,414.80 and settling at $2,407.80 in New York trading. As of 5:11 PM EDT, gold futures are trading on Globex at $2,399.50. The recent rally has been fueled by escalating inflationary pressures, heightened geopolitical tensions, and lackluster performance in Chinese property and equity markets.

Among these factors, the intensifying conflict in the Middle East has been the primary catalyst. On Saturday, Iran launched over 300 missiles and drones targeting Israel. Although 99% of the projectiles were successfully intercepted by Israel and its coalition partners, including the United States, England, France, and Jordan, fears persist that Israel may retaliate, potentially widening the regional conflict.

Gold prices also received a boost from a recent housing starts report. According to MarketWatch, "The rise comes after the United States reported housing starts plunged 12% in March, to an annualized rate of 1.022 million new units last month, well below the 1.52-million annualized rate in February and below the consensus estimate for 1.48-million starts."

Investors ignored Federal Reserve Chairman Jerome Powell's comments suggesting that higher inflation may necessitate maintaining current interest rate levels for an extended period. During an event at the Wilson Center in Washington, Powell stated, "The recent data have clearly not given us greater confidence, and instead indicate that it's likely to take longer than expected to achieve that confidence." Higher interest rates are bearish for gold in that gold does not yield interest.

Gold's remarkable gains also have occurred despite headwinds from a stronger U.S. dollar and rising Treasury yields. Treasury yields climbed to a five-month high due to diminishing expectations of rate cuts from the Federal Reserve.

Notably, gold investors have shrugged off the implications of Wednesday's higher-than-expected Consumer Price Index report, which revealed persistent inflationary pressures in the United States. Gold futures have exhibited tremendous value appreciation, having rallied nearly $400 per ounce since trading around $2,025 on February 14.

Wishing you as always good trading,