Gold prices saw an uptick on Thursday, driven by the ongoing Middle East conflict that has left investors in a state of caution. The precious metal held steady despite the U.S. dollar’s gains and rising bond yields, influenced by a prolonged expectation of higher interest rates.
The spot gold price rose by 0.3% to reach $1,986.40 per ounce as of 0729 GMT. Concurrently, U.S. gold futures experienced a marginal uptick of 0.1%, settling at $1,997.20.
The strengthening U.S. dollar and surging benchmark U.S. 10-year Treasury yields were a result of data revealing a substantial increase in new-home sales, reaching a 19-month high in September. This data has reinforced the anticipation of sustained high-interest rates well into 2024.
Investors are now looking ahead to significant events, including the European Central Bank’s policy announcement and the release of U.S. GDP figures later in the day. Particular emphasis is placed on the Personal Consumption Expenditures (PCE) price index, which is set to be disclosed on Friday, ahead of the Federal Reserve’s upcoming interest rate decision.
Preliminary indications suggest that the U.S. economy likely experienced its most rapid growth in the third quarter, with the highest pace seen in nearly two years.
Nikos Kavalis, the managing director at Metals Focus, commented on the Federal Reserve’s perspective, stating, “The Fed clearly regards higher interest rates as a strategy to curb inflation. Given the robust state of the U.S. economy, there appears to be no impediment to the possibility of another rate hike.”
Meanwhile, on the geopolitical front, Israeli ground forces engaged in operations within the northern Gaza Strip on Thursday, targeting multiple Hamas installations before eventually withdrawing, as reported by the military.
It is noteworthy that the impact of geopolitical developments, although contributing to gold’s appeal as a safe haven asset, tends to be relatively short-lived in comparison to broader macroeconomic events or financial crises that might compel global authorities to implement aggressive monetary and fiscal policies, as noted by Kavalis.
Gold remains a sought-after asset during times of economic and political uncertainty. However, its appeal can be dampened by higher interest rates, as it does not offer interest payments.
Analysts from ANZ emphasized the connection between the ongoing conflicts and gold’s safe-haven status. They pointed out, “While the ongoing war continues to drive investment flows toward gold, any further price gains will also depend on the timing of the Federal Reserve’s interest rate cycle.”
In the broader spectrum of metals, spot silver recorded a 0.2% gain, reaching $22.93 per ounce. In contrast, platinum exhibited a 0.4% decline, settling at $899.13, and palladium saw a marginal decrease of 0.8%, closing at $1,116.72.
