Gold prices supported by safe-haven demand

Gold prices edged higher on Thursday, rising from $2,620 to $2,635 per ounce. If gold prices rise, they may encounter resistance at $2,658 per ounce, while if gold prices decline, support may be encountered near $2,537 per ounce. 

Gold prices are supported by increased Fed rate cut expectations. The US Federal Reserve cut interest rates by 25 basis points last week to a target range of 4.25% to 4.50%. However, a 25-basis point rate cut had been fully priced in, and market participants focused mostly on the Fed’s forward guidance.

In his press conference after the policy meeting, Fed Chair Jerome Powell delivered a rather hawkish message, emphasizing the need to be cautious about further rate cuts. Powell stated that the Fed’s approach will remain data-driven and hinted that the pace of future rate cuts will be slower. 

In addition, the Fed’s updated dot plot was more hawkish than anticipated, bringing down expectations of future rate cuts. The Fed’s latest dot plot indicated that only two rate cuts will take place in 2025, down from four projected in September. 

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 gained strength on Thursday and the dollar index rose to 108.5. US treasury yields edged lower, with the US 10-year bond yield dropping from 4.61 to 4.57%.   

Geopolitical tensions continue to rise, boosting demand for safe-haven assets. The civil war in Syria is further destabilizing the region. The Syrian rebel army is currently in charge and political instability in Syria is reigniting geopolitical risks, boosting gold prices. In addition, tensions between Israel and Lebanon have cooled after the ceasefire deal, but hostilities between Israel and Hamas continue in the Gaza area. Meanwhile, the situation between Russia and Ukraine remains critical, with Russia threatening to use nuclear missions against Ukraine.

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Written by:
Myrsini Giannouli

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