Gold prices climbed on Thursday, as risks of a widening Middle East conflict raised bullion’s safe-haven appeal, overshadowing pressures from prospects of higher-for-longer U.S. interest rates.
“Given the fact that we do have a lot of uncertainty on the geopolitical front, which is supporting this upward trend that is still prevalent in gold,” said Kelvin Wong, a senior market analyst for Asia Pacific at OANDA.
Israel will make its own decisions about how to defend itself, Prime Minister Benjamin Netanyahu said, as Western countries pleaded for restraint in responding to a volley of attacks from Iran.
Although “U.S. interest rates remaining higher for a longer may be adding some pressure to the ongoing boost for gold… In the short term, we will start to see a bit of consolidation and a potential pullback,” Wong said.
Higher interest rates reduce the appeal of holding non-yielding bullion.
Federal Reserve officials are now being more careful about discussing the timing of rate cuts, with Chair Jerome Powell on Tuesday signaling rates may stay higher for longer.
Traders of futures contracts tied to the Fed’s policy rate are now pricing in less than 50 basis points of rate cuts for 2024, while betting on the first quarter point cut to arrive in September.
“Disinvestment in gold-backed exchange traded funds has been continuing. A lean level of investment in gold should be seen as a potential driver, as it limits scope for a heavy liquidation and suggests there is ample potential for fresh buying,” analysts at ANZ Research wrote in a note.
