Gold rises even after safe-haven demand drops

Gold prices rallied on Wednesday, rising from $2,630 to $2,660 per ounce before paring some of the day’s gains, retreating to $2,640 per ounce. If gold prices rise, they may encounter resistance at $2,725 per ounce, while if gold prices decline, support may be encountered near $2,600 per ounce. 

Geopolitical tensions cooled this week, leading to a drop in safe-haven demand. A 60-day ceasefire between Israel and Lebanon was officially declared on Wednesday. The deal will hopefully lead to discussions of a peace treaty and put an end to the 14-month conflict and has the potential to restore stability in the Middle East. However, reports of the ceasefire deal had already led to overselling of gold earlier in the week, putting pressure on gold prices. The news of the ceasefire had already been priced in by markets and when the official announcement came gold prices went up. 

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 dipped on Wednesday and the index dropped from 107.0 to 106.0. US treasury yields declined on rising rate cut expectations, with the US 10-year bond yield falling from 4.30% to 4.24%.

The US Federal Reserve cut interest rates by 25 basis points last week to a target range of 4.50% to 4.75%. The Fed launched its easing cycle in September, with an aggressive 50-bp rate cut, signaling the end of its restrictive monetary policy. Gold prices are supported by expectations of further Fed rate cuts. Market odds of a December rate cut rose to approximately 70% on Wednesday boosting gold prices. 

Gold prices skyrocketed to an all-time high of $2,700 per ounce earlier this month, but had been moving in overbought territory, and collapsed after the announcement of Donald Trump’s victory in the US Presidential elections. 

The announcement that President-elect Donald Trump has chosen hedge fund manager Scott Bessent as the new US Secretary of the Treasury put pressure on gold prices on Monday. Bessent is known for his cautious stance, and he is considered a safe choice to take over from Janet Yellen as the next US Treasury Secretary, which is lowering the demand for safe-haven assets.

Concerns over Trump’s proposed tariffs, however, raised safe-haven demand on Tuesday, boosting gold prices. President-elect Donald Trump communicated more tariff measures on his social media. Trump stated that his administration would impose an additional 25% tariff on imports from Canada and Mexico, with an additional 10% to the 60% already announced during his election campaign on Chinese goods. 

TRADE GOLD

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: