Gold soared to a new high above $2,200 on Thursday, as traders applauded the Federal Reserve’s announcement that interest rates would be slashed three times this year.
Equity markets in New York and around Asia jumped, while the dollar fell in response to the US central bank’s estimate that it will begin easing monetary policy this year, despite recent data showing inflation rising in January and February.
Gold dealers also joined the celebration to drive the precious metal to as high as $2,220 per ounce — building on a run that has seen it soar about 12 percent since mid-February.
A weaker dollar has contributed to the increases, as has gold’s appeal as a safe haven as international tensions mount.
Because bullion does not generate interest, when central banks cut borrowing costs, its safe-haven reputation increases its appeal to investors.
“What we saw last night was really the green light for gold traders to come back in,” said Chris Weston of the Pepperstone Group.
“The Fed (has) said that right now they’re tolerant of the inflation that we’ve seen, they’re tolerant that the labour market strength is not going to be the impediment.”