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Gold smashes through US$2300 level to set new highs

Another big session for gold with US futures smashing through the $US2,300 level, spot prices surging and all this happening despite another rise in US bond yields.

Federal Reserve Chair Jerome Powell added his bit by playing a familiar tune – that the US central bank will wait for clearer signs of lower inflation before cutting interest rates.

Powell said the recent US inflation figures — though higher than expected — didn’t “materially change” the overall picture.

He reiterated his expectation that it will likely be appropriate to begin lowering rates “at some point this year,” leaving open the timing of the cut which is now forecast to occur any time between June and December.

“On inflation, it is too soon to say whether the recent readings represent more than just a bump,” Powell said in his speech “We do not expect that it will be appropriate to lower our policy rate until we have greater confidence that inflation is moving sustainably down toward 2 percent,” he added.

“Given the strength of the economy and progress on inflation so far, we have time to let the incoming data guide our decisions on policy.”

That’s central banker-eese for don’t go off half-cocked because we’re not.

That saw the 10 year Treasury bond yield ease back to just over 4.35% after peaking above 4.42% in the session before Powell spoke at Stanford University on the West Coast just after midday.

Comex gold futures for June, crossed the $US2,300 mark, up 1.8% at $2,317.50 per ounce (after peaking at $US2,319.70 an ounce). The front month was just over $US2,296 an ounce.

According to the World Gold Council, the Australian dollar price was around $A3,497 an ounce and would have been above $US3,500 except for a rise in the value of the Aussie dollar to 65.60 US cents

Driving gold higher was continuing worries about tensions in the Middle east, especially around Gaza.

Those concerns also saw oil rise again with US crude above $US85 a barrel and Brent closing in on $US90 a barrel at $US89.55 just after 7am Thursday, Sydney time.

Copper at last broke higher, jumping 3.5% to just over $US4.21 a pound and setting a new 52 week high in the process of $US4.21.70 a pound.

But iron ore failed to fire and the SGX May futures price dipped back under $US100 a tonne for the second time this week but this time (unlike Monday when it bounced back) stayed there to close at $US98.55, down 3% on the day. It had opened at $US103.40 but then slid for the rest of the session.

Investors are still expecting a first rate cut at the Fed’s June 11-12 policy meeting, even as the stronger recent economic data has sown investor doubts about that outcome and the surge in oil prices especially will keep inflation higher – the next major inflation reading is out next week with the March CPI.

The US jobs report for March on Friday will be the next big test though – economists still see around 200,000 new jobs being created last month. 

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