Gold hits Record High on Bets for March Start to Fed Rate cuts

Gold prices rallied to an all-time high on Friday after remarks from Federal Reserve Chair Jerome Powell increased traders' confidence the U.S. central bank had completed its monetary policy tightening and could cut rates starting March.

Spot gold climbed 1.6% to $2,069.10 per ounce by 3:30 p.m. ET (2030 GMT). Prices were 3.4% higher so far this week, and earlier rose to $2,075.09 per ounce to beat the previous all-time high of $2,072.49 scaled in 2020.

Powell said "the risks of under- and over-tightening are becoming more balanced," but the Fed is not thinking about lowering rates right now.

"Gold bulls are focusing on Powell's comment that rate is well into restrictive territory which plays into the narrative that cuts will come sooner, pointedly ignoring his warning that it was premature to speculate on easing rates," Tai Wong, a New York-based independent metals trader.

Markets added to bets of a March start to rate cuts and an interest rate of under 4% by the end of next year.

Lower interest rates reduce the opportunity cost of holding zero-yield gold.

But, "prices may have entered overbought territory and gold has been known to price in monetary policy expectations prematurely over the past two years," Standard Chartered analyst Suki Cooper said in a note.

Boosting bullion's appeal, benchmark 10-year Treasury yields slipped to a 12-week low and the dollar (.DXY) ticked 0.3% lower.