Early Friday trading saw gold prices pull back from a recent five-day high, slipping from $2,418 reached during the Asian session to trade near $2,400. Despite this reversal, gold remains poised to secure its fifth consecutive weekly gain.
The surge in gold prices was primarily fueled by escalating tensions between Israel and Iran in the Middle East. ABC News confirmed reports, citing a US official, of Israeli missile strikes on Iran’s central city of Isfahan. This development triggered a flight to safety among investors, prompting a rush towards gold as a traditional safe haven, pushing its price back above the $2,400 mark.
While the US Dollar gained ground on risk aversion, its upside was limited as investors sought refuge in US Treasury bonds, resulting in a sell-off in yields. This dynamic continued to support gold prices amidst mounting geopolitical risks.
However, Iran’s response to the reported attack suggests a degree of downplaying, with an Iranian official stating that there had been no airstrike in Isfahan or other parts of the country. This denial from Iran could be tempering the rally in gold prices, at least temporarily.
Market participants will closely monitor developments surrounding the Israel-Iran conflict, as ongoing tensions are likely to keep gold prices well supported in the near term.
Meanwhile, on Thursday, gold prices remained resilient in the face of increasing speculation that the US Federal Reserve (Fed) may adopt a ‘higher rates for longer’ stance amid persistent inflation and a robust labor market. Comments from Atlanta Fed President Raphael Bostic and New York Fed President John Williams echoed this sentiment, endorsing a more hawkish narrative from the Fed.
Bostic highlighted the slower and potentially uneven path towards achieving the 2% inflation target, expressing patience in the process. Similarly, Williams emphasized the current adequacy of monetary policy, indicating a lack of urgency to implement rate cuts. These remarks underscored the broader market sentiment and provided additional support for gold amidst evolving economic dynamics.
