Gold (XAU/USD) prices rose by half a percent on Thursday, trading in the $2,330 range. This upward movement places gold at a crucial technical juncture that could determine its trend for the rest of the summer.
The European session began with a calm market mood, following mixed performances in Asian markets. However, gold’s appeal as a safe-haven asset increased due to escalating geopolitical tensions and strategic maneuvers by global powers.
Geopolitical Tensions Fuel Gold Demand
Gold prices have been bolstered by heightened geopolitical threats. In the Middle East, tensions escalated dramatically on Wednesday as Israel and Lebanon came close to conflict. Israeli officials announced plans for a potential “all-out war” with Hezbollah after the group’s leader, Hassan Nasrallah, released drone footage of Israeli docks in Haifa. This footage, managed by Chinese and Indian firms, has added to the regional volatility. U.S. diplomats are striving to prevent further escalation, as Lebanon and Israel have been exchanging missile attacks and skirmishing along their border since the onset of Israel’s Gaza invasion.
Strategic Moves by Russia and China
Further east, gold gains reflect investor concerns over significant strategic moves. Russian President Vladimir Putin and North Korean leader Kim Jong Un signed a mutual defense pact on Wednesday, promising support in the event of an attack on either nation. Additionally, Malaysia announced its intention to join the BRICS trading federation, following a similar declaration by Thailand in May. These developments underscore BRICS’ growing influence as a counterbalance to Western economic dominance, potentially disrupting global trade dynamics.
Economic Speculations and Fed Policy
The speculation surrounding the Federal Reserve’s monetary policy also contributes to gold’s rise. Recent U.S. economic data suggests easing inflationary pressures and a slowing economy, prompting expectations of potential interest rate cuts by the Fed later this year. This scenario typically benefits non-yielding assets like gold.
In summary, gold prices are currently influenced by a combination of geopolitical tensions and economic speculations. While the demand for gold as a safe-haven asset is rising, its future trajectory will depend on developments in these areas and the Fed’s policy decisions.
