Gold Prices Rise Amid Middle East Tensions and Rate Cut Optimism

by Nicholas Edwards · 08/08/2024

Safe-haven gold prices climb as Middle East tensions and expectations of U.S. rate cuts boost demand. Traders await U.S. economic data for Fed policy insights.

United States, Bollywood Fever: Prices of safe-haven gold edged higher on Thursday, driven by Middle East tensions and optimism about U.S. rate cuts. Traders are also eagerly awaiting economic data for clues on the Federal Reserve’s policy trajectory.

As of 0331 GMT, spot gold rose 0.3% to $2,389.42 per ounce, while U.S. gold futures slipped 0.2% to $2,428.40. Kelvin Wong, OANDA’s senior market analyst for Asia Pacific, noted that longer-term fundamentals look supportive for gold, citing geopolitical tensions in the Middle East and the downward trajectory of U.S. Treasury yields.

Iran will not remain silent over aggression, President Masoud Pezeshkian told French President Emmanuel Macron, according to state media. This statement comes amid fears of increased regional conflict following the killing of a Hamas leader in Tehran last week.

The benchmark 10-year Treasury yield slipped, making non-yielding bullion more attractive, while the U.S. dollar also edged lower. Brokerages such as J.P. Morgan, Citigroup, and Wells Fargo have forecast a 50 basis-point interest rate cut by the Fed in September after last week’s surprisingly weak U.S. employment report for July. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

Market focus will be on the initial U.S. jobless claims data due at 1230 GMT, with Richmond Fed President Tom Barkin also expected to speak later in the day. “In the near-term, I think the market will consolidate around the $2,350 level and move towards $2,500 later this year,” said Peter Fung, head of dealing at Wing Fung Precious Metals.

China’s central bank refrained from buying gold for its reserves for a third straight month in July, according to data.

Spot silver rose nearly 1% to $26.84 per ounce, platinum edged 0.1% up to $920.40, and palladium gained 1.2% to $892.75. Impala Platinum on Wednesday flagged $1 billion of impairments amid the lower value of its assets as metal prices plunged.

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