In the midst of a resurgence in the dollar and Treasury yields, gold prices exhibited resilience in Asian trading on Thursday. The yellow metal faced strong demand as a traditional safe haven, largely indifferent to the rise in the dollar and yields, driven by ongoing concerns regarding the Israel-Hamas conflict.
Despite the spike in the dollar and Treasury yields during overnight trading, the fear of a potential escalation in the war between Israel and Hamas kept safe-haven demand for gold upbeat. The conflict has seen continued missile strikes on Gaza, and Israel has reaffirmed its commitment to a ground assault in the region.
In response to these geopolitical tensions, spot gold registered a 0.5% rise, reaching $1,988.85 per ounce. Simultaneously, gold futures with a December expiry rose by 0.2% to $1,999.20 per ounce as of 00:53 ET (04:53 GMT).
Upcoming Economic Factors Pose Risks
Although gold benefited from its status as a safe-haven asset, it remains exposed to potential risks from upcoming U.S. economic data. The third-quarter U.S. gross domestic product (GDP) data, scheduled for release later on Thursday, is anticipated to reveal a substantial increase in economic growth.
While a strong U.S. economy is expected to boost risk appetite, it is also likely to provide the Federal Reserve with more room to maintain higher interest rates. Adding to the mix, the Personal Consumption Expenditures (PCE) inflation data for September, regarded as the Fed‘s preferred inflation gauge, is expected on Friday.
The central bank is poised to keep interest rates steady at its next meeting. However, Federal Reserve officials have hinted at the possibility of at least one more rate hike this year, emphasizing their commitment to prolonging higher rates in response to persistent inflation and a robust economy.
This combination of factors presents a challenging landscape for gold, as higher interest rates elevate the opportunity cost of holding bullion. Furthermore, any de-escalation in the Israel-Hamas conflict may potentially reduce safe-haven demand for the precious metal.
Before the Federal Reserve’s meeting, the European Central Bank (ECB) is scheduled to convene later on Thursday. The ECB is widely expected to keep interest rates unchanged but is likely to signal a prolonged period of higher rates, even in the face of signs pointing to a looming recession in the euro zone.
Copper Markets Await Key Economic Indicators
Shifting the focus to the industrial metals sector, copper prices displayed stability on Thursday, having previously experienced some losses. Traders are closely monitoring the imminent release of the U.S. GDP data, which will have significant implications for copper markets.
Copper futures registered a modest 0.1% rise, reaching $3.5903 per pound.
Despite the announcement of additional Chinese stimulus measures earlier in the week, copper prices have been less responsive due to growing concerns over a potential recession in the euro zone, which could lead to diminished copper demand in the coming months.
