In Wednesday’s early American session, the price of gold (XAU/USD) demonstrated resilience, rebounding to $2,400 as it eyes a potential surge towards new all-time highs around $2,430. This upward trajectory comes despite Federal Reserve (Fed) Chair Jerome Powell’s emphasis on maintaining a restrictive policy framework for an extended period.
Powell and his colleagues at the Fed appear inclined towards prolonging higher interest rates, citing persistent inflationary pressures and robust labor demand as key factors influencing their stance. This stance, while intended to curb inflationary pressures, has implications for the US Dollar and US bond yields.
Although 10-year US Treasury yields experienced a slight dip, they remained near a five-month high, hovering around 4.70%. Similarly, the US Dollar Index (DXY), which gauges the Greenback’s strength against a basket of major currencies, stabilized after reaching a five-month peak near 106.40.
Amidst these monetary policy considerations, tensions in the Middle East have added further support to the price of gold. Escalating tensions between Israel and Iran have heightened geopolitical concerns, with Israel preparing to retaliate against Iran’s attack. However, US President Joe Biden’s stance suggests a reluctance to support Israel’s counterattack, while US Treasury Secretary Janet Yellen has signaled intentions to impose new sanctions on Iran in response to its actions.
The possibility of fresh sanctions on Iran raises concerns about its oil exports, potentially impacting global oil markets. Against this backdrop of geopolitical uncertainty and monetary policy dynamics, gold continues to be sought after as a safe-haven asset, offering investors a hedge against volatility and geopolitical risks in the market.
