Gold prices (XAUUSD:CUR) jumped to a record above $2,200 an ounce for the first time, after the Federal Reserve maintained its outlook for three rate cuts this year, fueling a rally in the non-yielding asset.
On the day, spot gold was up +1.10% to $2,210.02 per ounce, as of 0615 am ET, after hitting an all-time high of $2,222.39. The risks of the Federal Reserve achieving its inflation and employment goals have moved into better balance, Chairman Jerome Powell said Wednesday in his press conference, after the central bank kept its policy rate unchanged at 5.25%-5.50% for a fifth straight time.
Additionally, a number of geopolitical risks, including the repeated attacks by Iran-aligned Houthi militants on international commercial shipping in the Red Sea region since mid-November, kept gold supported as a safe haven asset.
“I think the Fed not taking the opportunity of recently firmer inflation to lean hawkish at their meeting yesterday means gold is now going into a short-term overshoot scenario,” Marcus Garvey, head of commodities strategy at Macquarie Group, told Bloomberg. ” A move “towards $2,300 an ounce is a reasonable technical target,” he said.
Potentially relevant stocks: Critical Metals (CRML) +27%, Atlas Lithium (ATLX) +18%, Braskem S.A. ADR (BAK) +17%, Sibanye Stillwater Limited ADR (SBSW) +10%, Nature’s Miracle Holding (NMHI) -36%, American Resources (AREC) -7%, Global Gas (HGAS) -5%.
Turning to base metals, ANZ reported, iron ore prices (SCO:COM) may be near a floor amid a reset in expectations around demand, as weak consumption from the Chinese property sector is being countered by robust demand from other sectors.
With a large portion of Chinese domestic supply produced at costs higher than $100/t, the Bank sees the current price as a floor. Expects iron ore to trade in a $90–110/t range for the remainder of the year.
Iron ore prices (SCO:COM) have plunged more than 23% since the beginning of the year, and are down 12% over the past one month.
The base metals sector as a whole, however, is set to benefit from stabilizing growth and increased infrastructure investments in China. Renewed focus on electric vehicles and power grid extensions should revive downstream demand. Elsewhere, demand is likely to remain subdued in H1 2024, ANZ analysts added.
Elsewhere, oil prices were trading in the red, but both benchmarks traded well above $80/bbl, as investors weighed the supply outlook. “The rally in oil has started to fade with the market in overbought territory and little in the way of a fresh catalyst to keep the upward momentum going,” ING analysts stated.
According to J.P.Morgan’s global commodity research, demand indicators are showing oil demand averaging 101.8 mbd by March 19. However, year to date, total oil demand has increased by 1.5 mbd compared to the same period a year ago, 200 kbd below the Bank’s expectations, which it attributes to poor uptake in heating fuels consumption.
JPM expects Chinese oil demand to improve over the coming days as industrial activity makes a complete recovery following the holiday lull and the announced increase in the US-China weekly flights.
