Gold hits record high as Fed Chair Jerome Powell stays the course

MONEY & BUSINESS: Gold hits record high as Fed Chair Jerome Powell stays the course

The price of gold soared to a record high Thursday as investors plowed into the precious metal following Fed Chair Jerome Powell’s comments indicating that the central bank will start lowering interest rates “at some point this year.”

Gold was trading at $2,310 early Thursday morning — continuing an upward trend that has seen its value rise by more than 25% in the last six months — beating the S&P 500 index, which rose 22% in the same period.

Silver prices, meanwhile, reached their highest value in nearly three years, trading at $27.09 per ounce, a jump of nearly 13% in the first week of April.

Gold prices reached a new record on Thursday — breaking the $2,300 per ounce threshold. Anadolu Agency via Getty Images

Gold and other precious metals are considered a sound investment when interest rates are low because they pay no interest.

They’re also considered by analysts to be a smart hedge against inflation since paper currency loses its value while gold’s supply is limited.

Powell told an audience at Stanford University on Wednesday that while recent data indicates that inflation remains stubbornly high, it did not “materially change” the Fed’s overall strategy going into this year.

Still, the central bank chief sounded a note of caution.

“On inflation, it is too soon to say whether the recent readings represent more than just a bump,” Powell said.

Silver was worth $27.09 per ounce on Thursday. In the last month, the precious metal saw its value rise by nearly 13%. REUTERS

He added that he and other Fed officials “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.”

“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,” he said.

The World Gold Council, the UK-based international trade association, said it expects the value of the precious metal to continue to rise this year as central banks have been aggressively buying bullion.

Last year alone, consumption of gold rose 3% to 4,899 tons — the highest since 2010.

Fed Chair Jerome Powell indicated on Wednesday that the central bank still intends to cut interest rates this year. AP

“The landscape is appropriate for emerging central banks to continue to be net buyers,” Joseph Cavatoni, chief market strategist at the WGC, told Bloomberg News.

Last week, the core Personal Consumption Expenditures Index — the Fed’s preferred inflation gauge — rose 0.3% in February and 2.8% year-over-year — highlighting the difficulty in getting prices under control.

In March, the Fed kept decades-high interest rates unchanged  — at between 5.25% and 5.50% — following its meeting, though it made clear that it anticipates making three cuts this year.

Investors have been betting that the first of three 25-point basis cuts will begin in June.

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