Gold prices have experienced a notable surge, largely influenced by remarks from Federal Reserve official Christopher Waller and global geopolitical unrest. The most active February 2024 gold futures contract climbed to $2061.50, marking a significant gain of $26.30. This rise in gold prices is the highest in approximately a year and reflects a growing investor sentiment towards the precious metal.
The surge in gold is partly attributed to the weakening U.S. dollar, which has seen a decline over the last three trading days. The dollar index, which measures the currency against a basket of six foreign currencies, fell by about 0.44%, bringing it to 102.65. This drop represents a roughly 4% decrease since November 1.
Christopher Waller, a voting member of the Federal Reserve and considered one of its more hawkish figures, played a key role in influencing market perceptions. In a statement to the American Enterprise Institute think tank, Waller suggested that the Fed could consider lowering rates if inflation continues to decline, signaling a potential shift in monetary policy. His assertion that the Fed's policy is "well-positioned to slow the economy and get inflation back to 2%" has resonated strongly in financial markets.
Concurrently, the Bureau of Economic Analysis reported that the U.S. GDP grew at a faster pace of 5.2% in the third quarter, revised up from the initially reported 4.9%. This growth, primarily driven by business investment and government spending, was slightly stronger than the anticipated 5.0%. Despite this positive economic data, gold prices have only seen modest selling pressure, with December gold futures trading at around $2,038.50 an ounce.
Gold's resilience in the face of positive economic data indicates a broader market trend. Investors are increasingly betting on a pivot in Federal Reserve policy towards interest rate cuts next year. The metal, benefiting from haven buying amid global conflicts and declining bond yields, is now approaching its pandemic-era record high.
The market is also closely monitoring upcoming U.S. economic data, including the Fed's preferred inflation measure, for further clues on interest rate trajectories. With traders positioning for a potential economic downturn and aggressive Fed policy easing next year, gold continues to hold its rally, now standing just about $32 below its all-time high.
