Gold prices have extended their upward trajectory for the third consecutive day, reaching approximately $2,055 per troy ounce during the Asian session on Monday. The surge in the price of gold is attributed to a combination of heightened geopolitical tensions in the Middle East and speculation surrounding potential rate cuts by the Federal Reserve (Fed) in March.
Geopolitical concerns have intensified, particularly in the wake of the Israel-Gaza conflict escalation. The situation worsened as Iran-led Houthis fired an anti-ship cruise missile at the USS Laboon in the Red Sea on Monday. This development has fueled increased demand for gold, a traditional safe-haven asset during periods of elevated geopolitical uncertainty. Market participants are closely monitoring potential disruptions to shipments in the Strait of Hormuz and awaiting Iran’s response to recent geopolitical events.
The US Dollar (USD) is trading around 102.40 with a downward bias, influenced by the decline in US Treasury yields. The softer Producer Price Index (PPI) data from the United States (US) is seen as a possible trigger for the drop in US Treasury yields. The Dollar Index (DXY) has pared its intraday gains in response to the decrease in US Treasury yields. Presently, the 2-year and 10-year yields on US bond coupons are trading lower at 4.14% and 3.94%, respectively.
Adding to the downward pressure on the US Dollar is Barclays’ revised forecast, issued on Friday, anticipating the first Federal Reserve rate cut in March instead of June. Analysts from Barclays foresee a 25 basis points reduction in the Fed Funds rate by the Federal Open Market Committee (FOMC) during the March meeting, contributing to a shift in market sentiment towards expectations of a more accommodative monetary policy.
As gold prices continue to climb amid geopolitical uncertainties and evolving monetary policy expectations, investors are closely watching the global landscape for any developments that might impact the precious metal’s trajectory.
