Gold surges on increased geopolitical risks

Gold prices surged on Thursday, rising to the $2,350 per ounce level. If gold prices rise, resistance may be encountered at $2,350 per ounce, while if gold prices decline, support may be encountered near $2,280 per ounce. 

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar remained steady on Thursday, and the index hovered around 105.3. US treasury yields edged lower, with the US 10-year bond yielding approximately 4.46%.   

Gold prices have experienced a meteoric rise recently and are trading in overbought territory. Geopolitical tensions raise the appeal of safe-haven assets boosting gold prices. Concerns that the crisis in the Gaza area may spread to neighboring countries are raising demand for safe-haven assets keeping gold prices high. 

The crisis between Israel and Iran seems to have been diffused for the time being, however, causing a decline in safe-haven demand and putting pressure on gold prices. This week a risk-on sentiment has prevailed, lowering the appeal of safe-haven assets. Ceasefire talks between Israel and Hamas continue, raising hopes of a truce. Peace talks conducted in Cairo are reportedly progressing, despite ongoing military action by Israel on Hamas targets.

Fed rate cut expectations are propping up gold prices. The US Federal Reserve kept interest rates unchanged at its policy meeting last week, within a target range of 5.25% to 5.50%. The Fed’s forward guidance was hawkish, indicating that interest rates will remain at high levels for longer. Odds of rate cuts are becoming more moderate, putting pressure on gold prices, as policymakers have stated that they do not intend to start reducing interest rates until there is more evidence of disinflation.

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Written by:
Myrsini Giannouli

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