Hong Kong: Gold reached a new record on Monday, driven by growing optimism that the Federal Reserve will cut interest rates in the new year. Traders shrugged off Jerome Powell’s attempts to temper expectations. However, equity markets faced challenges in building on a positive lead from Wall Street, with attention shifting to key US jobs figures expected later in the week.
Bets on a monetary policy easing gained momentum after Powell stated on Friday that the economy was “well into restrictive territory” following over a year of rate hikes, pushing borrowing costs to a two-decade high. Recent data indicating a softening labour market, economic slowdown, and decreasing inflation toward the bank’s two per cent target contributed to stock rallies and a weakened dollar.
Gold prices surged to $2,135 at one point on Monday as traders sought refuge in bullion amid the Israel-Hamas conflict. The metal gained strength from speculation that the Fed could slash rates amid a slowdown in inflation. This, in turn, weighed on the dollar, making gold more affordable for international buyers. Bloomberg reported a 60 per cent chance of a rate cut in March, with a fully priced-in expectation for May.
“Markets are piling in on the rate cut bets,” said Capital.com’s Kyle Rodda. “Gold can run higher and will do so at the earliest sign of a recession.”
Powell sought to manage expectations after his remarks last week, cautioning that it was “premature” to speculate on when policymakers would start cutting. He emphasised the bank’s readiness to tighten monetary policy further if deemed necessary. Despite earlier indications of additional tightening, recent remarks from Powell and Chris Waller have been widely interpreted as signaling the end of rate hikes and the possibility of future cuts.
Bitcoin surpassed $40,000 for the first time since May last year, boosted by expectations of US approval for spot Bitcoin exchange-traded funds, including those from firms like BlackRock. Bloomberg reported potential approval by the Securities and Exchange Commission by next month.
Stock markets showed mixed performance, with Hong Kong, Tokyo, Shanghai, and Taipei in the red, while Sydney, Seoul, Singapore, Manila, Mumbai, Bangkok, and Jakarta experienced gains. Wellington remained flat. London, Paris, and Frankfurt opened lower.
In Hong Kong, troubled developer China Evergrande briefly surged over 13 per cent after a court ruled on Monday that it has until late January to present a restructuring plan to avoid liquidation, extending the previous December deadline. .— AFP
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