Market update: gold retracts from all-time high amid Fed's rate cut delay signals

Gold pulls back from new all-time high as Fed speakers spoil the rally

Gold reached a new milestone, trading above the previous all-time high of £2,431, but swiftly retreated as Fed speakers warned that rate cuts are still some way off.

Atlanta Fed President Raphael Bostic recounted the inflationary pressures of Q1, emphasising that there is still work to be done, although he expects inflation to ease into 2025. Governor Michael Barr echoed these sentiments, while Governor Philip Jefferson noted that the softer inflation print in April is encouraging. Overall, the tone suggested a preference to keep interest rates elevated until the committee is confident that prices are heading back to target.

Markets have adjusted expectations, now pricing in a likely rate cut in November instead of September, and noting that the Fed tends to avoid policy changes during a presidential election year. Consequently, the FOMC may consider cuts in either September and December, or in 2025.

Market implied rate cuts (in basis points) for the remaining meetings in 2024

A lesser chance of rate cuts tends to support the dollar, and the slight increase in the dollar and yields has caused precious metals to retreat from their intra-day highs. Higher yields make non-interest-bearing metals less attractive, potentially leading to outflows from gold. However, gold is experiencing a phenomenal bull run, and it would take a significant resurgence in inflation to see sharper declines over the coming days and weeks.

The 161.8% Fib level at $2360 marks the next level of support, followed by the upper trendline (former resistance, now support) of the former channel.

Gold daily chart

Silver retreats from the yearly high at the start of the week

Silver on the other hand, appears to be benefitting both as a precious metal and an industrial one. Silver is a less well-known component within the clean energy transition, used most notably in solar panels.

Silver traded to an 11-year high earlier in the session only to pullback intra-day, trading flat at the time of writing. The immediate level of support appears at the psychological at a $30 mark, which coincides with the top of the 2020- 2021 ascent from which the orange Fibonacci levels are drawn.

Silver daily chart

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