Gold extends 5-day surge on Treasuries rally amid growing expectations of rate cuts

Gold extended its winning streak to a fifth consecutive day, marking its longest run of gains since the conclusion of November. The surge was propelled by robust demand for Treasuries, a signal that investors hold confidence in the Federal Reserve’s inclination to adopt a more accommodating monetary policy in the coming year.

On Wednesday, US bonds experienced a rally that pulled yields down to levels unseen in months, driven by mounting expectations that inflation will continue its descent to a sufficiently low level, prompting the Fed to consider imminent interest rate cuts. The global bond market is poised to achieve its most significant two-month gain on record.

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Market indicators from swaps markets are currently assigning an approximately 85% probability of an interest rate cut by March. Typically, lower yields and rates bode well for non-interest-bearing assets such as gold.

In 2023, the precious metal has seen a remarkable uptick of about 14%, positioning itself for its first annual increase in three years. Gold reached a peak of $2,135.39 per ounce in early December.

As of 2:32 p.m. in Singapore, gold posted a 0.3% climb, reaching $2,084.55 per ounce. The Bloomberg Dollar Spot Index registered a 0.2% decline, following a 0.4% drop in the previous session, marking a fifth consecutive day of decline.

Silver and palladium also experienced gains during this period, while platinum maintained a steady performance.