Safe-haven gold saw gains on Wednesday as the ongoing conflict in the Middle East and the anticipation of crucial U.S. economic data provided investors with key cues regarding the Federal Reserve’s policy direction.
Spot gold rose by 0.7% to $1,983.89 per ounce at 9:51 a.m. ET (1351 GMT), following declines in the previous two sessions and trading slightly below the five-month high reached last week. U.S. gold futures also saw an increase of 0.5%, reaching $1,995.20.
Geopolitical concerns, according to Bob Haberkorn, Senior Market Strategist at RJO Futures, are persisting in the short term, which is expected to maintain support for gold. The military escalation in southern Gaza by Israel continues, despite international calls for a ceasefire.
While gold experienced upward momentum, the dollar index and benchmark U.S. 10-year Treasury yields made slight gains. These factors played a role in limiting the extent of gold’s rise.
Investor attention is now directed towards U.S. third-quarter GDP figures set to be released on Thursday and the U.S. PCE price index, scheduled for Friday. These data points have the potential to influence the Federal Reserve’s outlook on interest rates. Higher interest rates increase the opportunity cost of holding non-yielding gold.
Market expectations, as reflected in the CME FedWatch tool, indicate that the Federal Reserve is likely to maintain interest rates at its forthcoming policy meeting next month.
Bob Haberkorn further added that if the economic data reveals a slowdown, it would provide the Federal Reserve with additional reasons to refrain from raising interest rates. Such a scenario is anticipated to be highly supportive for gold, potentially pushing prices back above the $2,000 mark.
On the global economic front, U.S. business activity in October displayed an uptick, while the euro zone faced an unexpected downturn in output, as per recent surveys. This divergence underscores the differing paths that central bankers in these regions are currently navigating.
In the physical market, China’s gold consumption in the first three quarters of 2023 witnessed a notable increase of 7.32% compared to the previous year. This surge is attributed to rising demand amidst China’s economic recovery, as reported by the China Gold Association.
In contrast to gold, spot silver experienced a 0.3% decline, settling at $22.87 per ounce, while platinum recorded a gain of 1.6%, closing at $898.08, and palladium saw a 0.9% increase, reaching $1,130.20.
