By Joe Wallace 

Metal prices shot up Thursday, lifted by a weaker dollar, after the Federal Reserve suggested it was willing to lower interest rates in the coming months.

Gold futures rose 2.8% to $1,386.30 a troy ounce in New York, putting the securities on course for their biggest one-day advance since October. Earlier in the day, the precious metal reached a peak of $1,390.70, its highest since September 2013.

Industrial metals also advanced, led by copper's 1.5% rise to $5,982 a ton on the London Metal Exchange. Aluminum, nickel, zinc and tin all gained 1% or more -- amid a broader rally in global stocks and bonds, as well as oil -- as investors ramped up bets that the Fed will soon lower interest rates, weakening the dollar and boosting commodities priced in the U.S. currency.

The most recent rise in gold prices is the latest leg in a rally that began late May when President Trump appeared to open up another front in the trade conflict by threatening Mexico with tariffs.

The precious metal, considered a safe-haven asset, has gained 8.5% over the past month, boosted by mounting expectations that the Fed and other central banks will ease monetary policy, as well as heightened geopolitical tensions in the Middle East and elsewhere.

The U.S. central bank kept rates steady Wednesday, but Chairman Jerome Powell said "the case for somewhat more accommodative policy has strengthened." His comments prompted the interest-rate futures markets to price in a 100% chance of a reduction in July and a 69% chance of three or more cuts by the end of 2019, according to CME Group.

For gold investors, lower interest rates make yield-bearing assets such as government bonds less attractive. The rate on 10-year Treasury notes slipped to 1.996% Thursday, having fallen below 2% for the first time since late 2016 after the Fed's statement.

In a sign of renewed interest among money managers, investors have plowed more than $885 million into the SPDR Gold Trust exchange-traded fund, net of redemptions, so far in June.

Industrial metals, in contrast, have been languishing near their lowest levels of 2019, hurt by concerns about U.S.-China trade tensions and their impact on global growth. Since base metals are the building blocks of everything from ships to autos, they are highly sensitive to momentum in the world economy.

Commodities investors should remain cautious, according to Robin Bhar, head of metals research at Société Générale.

"There are still a lot of storm clouds hanging over the market, so let's not get carried away," Mr. Bhar said. Inflation, which can boost commodity prices, is low in the U.S., the eurozone and Japan, and "worries over growth haven't gone away." China's efforts to reduce its dependence on infrastructure projects to bolster growth may also lead to a reduced appetite for metals, he said.

Other analysts and investors say tightening supplies, the result of a lack of major investment in new mines after the 2014-15 slump in commodity prices, have put a floor under prices and are likely to provide a source of longer-term strength.

"The weakness that we saw in April and May and the bottoming out in June was detached from market fundamentals," said Kash Kamal, a strategist at BMO Capital Markets. "If you look at the copper market, there's no significant mining supply growth this year. Only in 2022 and beyond will you have significant new copper supply coming online."

(END) Dow Jones Newswires

June 20, 2019 07:27 ET (11:27 GMT)