Gold Prices Hold Steady
Gold prices stabilized on Tuesday, following a surge to a record high in the previous session. This was attributed to the dovish comments from U.S. Federal Reserve officials and escalating tensions in the Middle East.
Spot gold was steady near $2,627.43 per ounce as of 0227 GMT. Bullion hit a record high of $2,635.29 on Monday.
U.S. gold futures were also nearly unchanged at $2,652.50.
“Gold prices continue to be well-supported amid a series of dovish Fed rhetoric overnight,” said IG market strategist Yeap Jun Rong.
Fed policymakers on Monday said their large half-point rate cut last week was meant to try to sustain what they see as an emerging and healthy balance in the economy. Chicago Fed Bank President Austan Goolsbee said there are “lots of cuts” to come over the next 12 months, while Fed President Neel Kashkari noted that the actual path would depend on incoming data.
Fed futures traders have priced in 75 basis points in rate cuts by the end of 2024, according to the CME FedWatch Tool.
Geopolitical Tensions Impact Gold Prices
Zero-yield bullion tends to be a preferred investment in a low-interest-rate environment and during geopolitical turmoil. The recent tensions in the Middle East between Israel and Hezbollah have contributed to the surge in gold prices as investors seek safe-haven assets to hedge against geopolitical risks.
According to Yeap Jun Rong, “Tensions in the region will likely be kept high for longer, which could see gold prices retain its bullish bias.”
Israel’s military launched airstrikes against Hezbollah sites in Lebanon on Monday, resulting in 492 deaths and forcing tens of thousands to flee. This marked the country’s deadliest day in decades.
Other Metals Performance
Among other metals, spot silver rose 0.6% to $30.84 per ounce, platinum gained 0.7% to $962.47 and palladium edged 0.1% down to $1,040.72.
Gold prices are not only influenced by economic factors like interest rates but also by geopolitical tensions. The demand for gold tends to increase during times of uncertainty and conflict, which can significantly impact its price. As seen in the case of the Middle East tension between Israel and Hezbollah, gold prices surged as investors sought a safe haven for their investments. It’s essential for investors to keep a close eye on both economic indicators and geopolitical events when monitoring the price of gold and other precious metals.
