In the Asian trading session on Wednesday, gold prices continued their upward trajectory, with the precious metal trading at around $1,940 per troy ounce. This surge can be attributed to multiple factors, including escalating geopolitical tensions between Israel and Hamas, as well as unexpected positive economic data from China.
The ongoing conflict in the Middle East has contributed to a higher demand for gold as a traditional safe-haven asset. On Tuesday, conflicting reports emerged regarding an Israeli air attack in Gaza, with authorities in Gaza claiming 500 casualties at a hospital. In contrast, Israel attributed the damage to a Palestinian attack, as reported by Reuters. Such geopolitical instability often leads investors to seek refuge in gold.
China’s economic data also played a pivotal role in bolstering gold prices. In the third quarter, China’s Gross Domestic Product (GDP) exceeded expectations, showing a growth rate of 1.3%, surpassing the anticipated 1.0%. The annual report for the same quarter revealed an impressive 4.9% increase, outperforming the expected 4.4%.
Furthermore, China’s Retail Sales (Year-on-Year) witnessed a notable rise of 5.5%, surpassing both the previous figure of 4.6% and the expected 4.9%. This unexpected positive economic data from China has prompted interest in gold as a hedge against potential global economic uncertainties.
While these developments supported the rise of gold prices, the US Dollar Index (DXY) experienced a loss of intraday gains after the release of Chinese figures, struggling to maintain its position near 106.10 at the time of this report. Nonetheless, US Treasury yields showed improvement, with the 10-year US Treasury bond yield reaching 4.83%, potentially supporting the US dollar.
In the United States, the US Bureau of Economic Analysis (BEA) reported that Retail Sales exceeded expectations in September, rising to 0.7% from the projected 0.3% Month-on-Month (MoM) increase. Additionally, the Retail Sales Control Group recorded a substantial increase of 0.6%, compared to the previous rise of 0.2%. This data indicates the resilience of the US economy.
Moreover, the Federal Reserve reported that Industrial Production demonstrated improvement by 0.3%, contrary to the expected stagnation at 0.0%. However, some Federal Reserve officials have expressed differing views on monetary policy. Thomas Barkin, President of the Richmond Fed, suggested that current policies are viewed as restrictive and emphasized the uncertainty surrounding the upcoming FOMC monetary policy meeting in November. He highlighted that the US central bank cannot rely solely on higher bond yields in the long term to implement tightening measures in monetary conditions.
Minneapolis Federal Reserve Bank President Neel Kashkari also remarked on Tuesday, noting that inflation has persisted for a more extended period than initially anticipated and remains excessively elevated. This dovish perspective aligns with the stance maintained by several other Fed officials.
In the coming days, investors are likely to focus on housing data and speeches from Fed officials, which could provide further insights into the future path of monetary policy.
