Fool's gold for gold bugs

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by Glenn Dyer

A case of fool’s gold for gold bugs as the spot price finally topped US$2,200 an ounce on trading on Thursday, a day after the Fed indicated it would push to cut interest rates this year -- but not just yet.

Gold for June delivery closed up US$24.10 to settle at US$2,206.50 per ounce, topping the prior record of US$2,188.50 set on March 11, but down from the session high of US$2,246.60.

The surge saw the Aussie dollar price surge above A$3,300 an ounce to be around US$3,319 at 7am Friday, Sydney time.

That in turn will boost the share prices of Australia’s myriad listed miners.

The rise came on expectations of the rate cuts -- which may not happen because it really depends on the future path of inflation.

The US dollar rose and US Treasury bond yields remained elevated at just above 4.28 per cent. Normally those levels would be negative for gold and other US dollar priced commodities, like oil, which eased a touch.

Comex copper futures also rose as traders ignored the bond yield rise and higher dollar.

"The Fed followed through on what was widely expected, and left interest rates unchanged (the benchmark is still at its highest since 2001). The Fed maintained their outlook for three quarter point cuts this year, but fewer in 2025 than previously, and stronger economic growth is expected.

"With the market still left looking towards June for a first cut, the rate narrative for gold is just a bit more positive," RBC Capital Markets commodities strategist Christopher Louney said in a note.

Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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