Gold prices inched higher on Thursday, reaching a near 2-1/2-month high, driven by mounting turmoil in the Middle East that amplified demand for the precious metal as a safe-haven asset. Simultaneously, investors eagerly awaited U.S. Federal Reserve Chair Jerome Powell’s upcoming speech, which held potential implications for the U.S. interest rate trajectory.
Spot gold registered a 0.2% increase, trading at $1,950.83 per ounce by 0127 GMT, after reaching its highest point since August 1 earlier this week. U.S. gold futures experienced a marginal 0.3% decline, settling at $1,962.90.
A tragic blast at a Gaza hospital on Tuesday resulted in the loss of hundreds of Palestinian lives. This occurred just as U.S. President Joe Biden visited Israel amid the ongoing conflict between the Israeli military and the Hamas militant group.
Gold, renowned for its role as a safe store of value during times of political and financial uncertainty, has seen an impressive surge, with prices rising by nearly $140 or 8% since their dip to a seven-month low on October 6.
Market focus is now intently directed towards Powell’s speech at the Economic Club of New York, where observers are seeking further insights into the path of U.S. interest rates. This comes after recent dovish comments from several Federal Reserve officials.
According to a Reuters poll, the Federal Reserve is anticipated to maintain its key interest rate on November 1 and may delay any potential cuts longer than previously anticipated. The central bank’s “higher-for-longer” message is gaining traction.
John Williams, the President of the Federal Reserve Bank of New York, has stated that interest rates will need to remain high for an extended period to achieve the central bank’s 2% inflation target.
It’s important to note that higher interest rates tend to elevate the opportunity cost of holding gold, which is priced in dollars and doesn’t yield any interest.
A Federal Reserve report published on Wednesday revealed that U.S. economic activity remained relatively stable over the past month and a half. Labor market tightness has continued to ease, while prices have continued to increase at a modest pace.
In the precious metals market, spot silver remained steady at $22.86, platinum experienced a 0.3% decline, settling at $883.07, and palladium edged 0.2% lower to $1,126.86.
Upcoming Data and Events (GMT):
0645 France Business Climate Manufacturing, Overall for October
1230 U.S. Initial Jobless Claims Weekly
1230 U.S. Philadelphia Fed Business Index for October
1400 U.S. Existing Home Sales for September
