Gold continued its upward trend for the third consecutive session on Thursday, with escalating tensions in the Middle East driving safe-haven demand. Federal Reserve Chair Jerome Powell’s comments also raised expectations that the U.S. central bank might pause its rate hikes.
Spot Gold: Spot gold surged by 1.3% to reach $1,973.41 per ounce by 2:58 p.m. ET (1858 GMT).
U.S. Gold Futures: U.S. gold futures settled 0.6% higher at $1,980.50.
Amid the ongoing conflict in the Middle East, which saw Israel conducting more air strikes on Gaza, world leaders, including British Prime Minister Rishi Sunak and U.S. President Joe Biden, have expressed support for efforts against Hamas while urging Israel to alleviate the situation for Gazans.
However, analysts noted that despite gold’s recent gains due to geopolitical tensions, there are concerns about potential “buying exhaustion.”
Powell’s remarks played a pivotal role in gold’s performance. He struck a balanced tone, leaving the door open for further rate hikes due to the economy’s resilience while acknowledging emerging risks that warrant a cautious approach.
Edward Moya, Senior Market Analyst at OANDA, emphasized that the market did not interpret Powell’s comments as hawkish. Instead, it perceived several economic risks, which could continue to support gold prices.
As a result of Powell’s remarks, traders adjusted their expectations, with a 70% chance of no rate hike in December, compared to a near 50% chance prior to his statement, according to CME’s FedWatch Tool.
Higher interest rates can increase the opportunity cost of holding non-yielding assets like gold. Analysts suggested that any signs of deteriorating economic data in the U.S. might attract more interest in gold, which has the potential to move beyond the $2,100 mark.
Other Precious Metals:
Spot silver rose 0.1% to $22.89.
Platinum was up 0.5% at $889.92.
Palladium fell 1.5% to $1,112.12.
