Gold prices reach $2400 for first time in history

Gold prices rose in European trade on Friday on track for the second profit in a row, trading above $2400 for the first time in history amid strong haven demand due to the mounting tensions between Iran and Israel. 

The gains are also boosted by the tapering off of US 10-year treasury yields after somewhat tepid producer prices data, which boosted the odds of a Fed interest rate cut in the summer. 

The precious metal is heading for the fourth weekly profit in a row, the longest such streak of weekly gains since December 2022, amid expectations the metal will head towards $2500 later on.

Prices 

Gold prices rose 1.2% today to $2400.69 an ounce, a record high.

Gold prices rallied 1.65% on Thursday, resuming their gains following weak US producer prices data, and after prices fell 0.8% on Wednesday following a spike in consumer prices data. 

Israel-Iran Tensions 

The Wall Street Journal said that Israel is preparing for an Iranian attack in the next two days after its presumed air strike on the Iranian consulate in Syria. 

The Israeli government warned that if Iran attacked Israel, the Israeli army would respond with an attack on Iranian territory. 

Iran’s supreme leader Khamenei threatened to punish Israel, after accusing it of striking the Iranian consulate in Syria last week, killing 7 military officials. 

The mounting Israel-Iran tensions threaten a potential widening of the war between the two sides in the region, which could threaten supplies. 

US Yields 

US 10-year treasury yields fell 1.25% on Friday off five-month highs at 4.593%, providing support for non-yielding assets. 

The dip came after tepid US producer prices data, which underpinned expectations of Fed interest rate cuts this year. 

Scorching US Consumer Prices Data 

Recent government data showed US consumer prices surged 3.5% y/y in March, the highest level since September 2023, and up from 3.2% in February. 

Core prices rose 3.8% y/y in March, above estimates of 3.7%. 

Producer Prices 

Earlier government data showed producer prices rose 0.2% m/m in March, while surging 2.1% y/y. 

Core producer prices rose 2.1% y/y in March, below estimates of 2.2%. 

US Rates

Following the collective data, the odds of a Fed interest rate cut in June hovered at 25%, while the odds of such a cut in July hovered at 51%. 

Now traders barely expect two interest rate cuts from the Federal Reserve this year totaling 50 basis points, down from 75 basis points before. 

The UBS bank now expects the Fed to start cutting rates in September. 

Weekly Trades

Gold prices are still up 3.0% so far this week, on track for the fourth weekly profit in a row, the longest such streak of gains since December 2022. 

Gold Performance Projections

JPMorgan's analysts foresee gold prices hitting $2500 an ounce this year.

The SPDR

Gold holdings at the SPDR Gold Trust rose 2.3 tonnes yesterday to a total of 830.75 tonnes, the highest since April 4.