(Bloomberg) -- Gold set a new record, while other precious metals also chalked up big gains, after Federal Reserve Chair Jerome Powell reiterated the US central bank will likely cut interest rates this year.
Bullion hit a fresh high of $2,152.25 an ounce, while palladium broke the $1,000-an-ounce mark with gains of more than 10%.
Gold rose as much as 1.1%, boosted by the Fed chair's comments during his congressional testimony. Powell said it will likely be appropriate to begin lower borrowing costs “at some point this year,” but made clear they're not ready yet. He also said he's not looking for inflation to reach the central bank's 2% target to start easing policy.
“Powell did confirm that cuts are happening later this year,” said Aakash Doshi, an analyst at Citigroup. “There's less hawkish risk.”
Gold's has climbed 5% over the last five sessions, a swift ascent that has taken some in the market by surprise, particularly since there hasn't been any major change in expectations for when the Federal Reserve will lower borrowing costs. Swaps markets show a 66% chance of a cut in June, compared with 58% at the end of February. Lower rates are typically positive for bullion, which doesn't offer any interest.
Citi raised its gold forecast for the next three months to $2,200 an ounce, and upgraded the projection to $2,300 for the next six to 12 months. It cited recession risks in the second quarter, which can favor gold, “especially given the recent equity and credit market rallies.”
Beyond rates, other factors have contributed to gold's strength. Macro funds, which haven't been active in the market until recently, were a new force of buying. Bullion's role as a haven asset is also being aided by elevated Middle East tensions and disruptions to global shipping, China's persistent economic woes and the US presidential election at the end of the year.
Spot gold rose 0.7% to $2,143.46 an ounce as of 2:18 p.m. in New York. The Bloomberg Dollar Spot Index fell 0.3%. Silver and platinum rose, while palladium surged as much as 12%, reaching its highest value since early January. Copper also posted gains.
--With assistance from Atul Prakash.
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