Key points:
Gold prices remained elevated at $2,658.07 per ounce after reaching a record high of $2,664.25. This move higher can be traced to two major factors. First, the dollar weakened by 0.2%, making dollar-denominated gold cheaper for holders of other currencies.
Second, geopolitical concerns are growing. Israel’s airstrike on Beirut, which resulted in the death of a Hezbollah commander, has heightened fears of a broader conflict. These factors are boosting demand for gold as a safe-haven asset.
Picture: Gold prices remain steady, trading at 2654.84 on the VT Markets app.
U.S. gold futures edged 0.2% higher to $2,682.60. The uptick in futures mirrors the mood in the spot market, with traders hedging against ongoing risks. If tensions in the Middle East escalate further, we expect bullion prices to see sustained support. However, the likelihood of further upward moves may depend on the evolving geopolitical landscape and key interest rate decisions.
In the background, data on U.S. consumer confidence showed a sharp drop in September, the largest decline in three years. This has reignited speculation that the U.S. Federal Reserve could implement further rate cuts. Futures traders are already pricing in a 75-basis-point cut by the end of the year, which could create further demand for zero-yield gold.
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Historically, gold thrives in a low interest rate environment, as the opportunity cost of holding bullion decreases. However, Fed Governor Michelle Bowman struck a cautious tone on inflation, suggesting that the central bank is still carefully monitoring inflation levels, which remain above the 2% target.
As traders await comments from Fed Governor Adriana Kugler, attention will likely stay on gold’s reaction to rate signals. With inflation still “uncomfortably above” target, any Fed action could influence the appeal of safe-haven assets like gold.
Other metals in the precious market moved differently, with spot silver steady at $32.11 per ounce, platinum rising 0.4% to $989.60, and palladium falling slightly by 0.2% to $1,054.75. While the broader precious metals complex remains stable, gold continues to dominate the market’s attention, driven by the confluence of geopolitical risk and central bank policy.
Given the current environment, we remain cautious on the outlook for gold, but further upside potential exists if both geopolitical and economic risks remain elevated.
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