Gold flirts with a record high after three days of consecutive gains

Gold futures have traded almost $100 higher from Tuesday's open to today's intraday high. Gold opened at approximately $1990 on Tuesday and closed at approximately $2022 after factoring in a daily gain of over $30. Yesterday gold had a moderate gain moving the most active June contract to an intraday high of $2049 and closing at approximately $2037.

However, today's range was the largest of the last 3 days trading to a low of $2038.50 and a high of $2085.40. As of 5:50 PM EDT most active June Comex gold contract is fixed at $2058.60 after factoring in a gain of $21.60 gaining just over 1%.

The Federal Reserve raised rates by ¼% yesterday, taking its benchmark Fed funds rate to its highest level since 2008. In fourteen months, the Fed has raised rates a total of ten times, once at every FOMC meeting since March 2022.

The Fed has taken its benchmark rate from near zero to between 5% and 5 ¼ %. More importantly, the Fed indicated it is ready to pause raising rates as it gauges the net effect of the rate hikes already implemented.

According to the CME's FedWatch tool, there is a 79.5% probability that the Federal Reserve will pause at its June FOMC meeting and maintain its current benchmark rate between 5% and 5 ¼%. However, more startling is the probability of 20.5% that the Federal Reserve will implement an interest rate cut of ¼%. This goes against the strong narrative and resolve that the Fed has maintained since the release of the December 2022 "Dot Plot".

Pausing rate hikes at the next FOMC meeting is an extremely logical move for the Federal Reserve. This will allow the Fed to assess the damage from recent bank failures, and gauge inflationary levels which will lag behind rate hikes already implemented by the Federal Reserve. A pause would also allow the Fed to wait for a resolution over the US debt ceiling dilemma.

The chart above is a weekly chart of the continuous contract of gold futures. The horizontal line is placed at the record high. The most likely outcome of this rally will be that the triple top will be taken out and result in a new record high for the price of gold.

By

Gary Wagner

Contributing to kitco.com

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