Gold prices jump to a lifetime high

The precious metal posted historic gains on Monday

By Nadia Elbilassy | @Nadia Elbilassy | 5 December 2023

Gold at all time high
  • The yellow metal steadied near the $2,027 region in a significant turnaround from its all-time high touched on Monday.

  • The 2024 rate reduction theme gained momentum, supported by factors like diminishing inflation and a less hawkish stance.

Gold prices stabilized after touching an all-time high before sharply retracing from its historic peak. Heightened demand for the precious metal as a safe haven rose following concerns about a broader conflict in the Middle East, triggered by an attack on U.S. vessels in the Red Sea. Simultaneously, fears of potential disruptions in gold markets were elevated by a separate, unrelated attack on a significant gold mine in Peru.

The surge was further fueled by conflicting signals from Federal Reserve officials, contributing to expectations of an earlier implementation of interest rate cuts by the central bank.

Throughout the year, the yellow metal has fluctuated around the $2000 level, but since October and the onset of tensions in the Middle East, it has consistently traded within this range.

The speculation about a potential reduction in borrowing costs by the central bank in 2024 has been fueled by factors such as diminishing inflation, subdued labor market data, and signals from the Federal Reserve indicating a less hawkish stance.

The 2024 rate theme has been getting priced by the markets for the past month and is seen stretching out quite a bit, adding to this optimism was Jerome Powell’s speech on Friday whose made changes to his usual standard language and gave a more dovish stance about rate hikes further fueling expectations of the end of the tightening era.