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

Credit: REUTERS/Denis Balibouse

By Brijesh Patel

March 21 (Reuters) - 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 XAU= was up 0.8% at $2,203.84 per ounce, as of 0153 GMT, after hitting an all-time high of $2,222.39 earlier in the session. U.S. gold futures GCcv1 jumped 2.1% to $2,206.30.

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.

"There was a period of sluggish sentiment in the market when net longs fell notably. However, a dovish Fed, a little squeeze on existing shorts, and a touch of momentum chasing have boosted bullishness."

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.

The dollar =USD slipped to a one-week low against its rivals, while benchmark U.S. 10-year Treasury yields US10YT=RR also dipped. USD/US/

"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.

Spot silver XAG= gained 0.4% to $25.70 per ounce, platinum XPT= rose 0.8% to $914.25 and palladium XPD= climbed 1.2% to $1,034.

Gold record high https://tmsnrt.rs/3VoNsFF

(Reporting by Brijesh Patel in Bengaluru; Editing by Sherry Jacob-Phillips and Subhranshu Sahu)

((Brijesh.Patel1@thomsonreuters.com; Within U.S. +1 651 848 5832, Outside U.S. +91 9590227221; Reuters Messaging: Brijesh.Patel1.thomsonreuters.com@reuters.net))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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