Gold prices (XAU/USD) experienced a surge, reaching $1,950 after pulling back from its recent peak at $1,962 during Thursday’s early Asian trading session. The rally in the value of the precious metal can be attributed to a growing geopolitical tension in the Middle East, which has prompted investors to seek safe-haven assets.
Simultaneously, the US Dollar Index (DXY), representing the value of the USD against six other major currencies, has climbed to 106.55. Furthermore, US Treasury yields have witnessed an increase, with the 10-year yield soaring to 4.911%, the highest level since 2007, while the 2-year yield has stabilized at 5.229%.
In terms of monetary policy, Federal Reserve (Fed) officials have reiterated their stance on keeping interest rates unchanged. This has led to higher US bond yields, driven by the robust US economic growth. Christopher Waller, Governor of the Federal Reserve, stated that it is premature to determine whether additional policy rate actions are necessary. He emphasized the importance of the central bank’s ability to assess the situation before deciding on the appropriate path for policy actions. John Williams, President of the Federal Reserve Bank of New York, indicated that the central bank needs to implement a restrictive monetary policy for a certain period to curb inflation, with future monetary policy decisions dependent on data.
Meanwhile, the ongoing geopolitical conflict between Israel and Hamas remains a crucial concern. Israeli officials claimed that a Palestinian attack caused the damage, but Gaza authorities reported that an Israeli air strike on a hospital in the Palestinian territory resulted in the death of 500 people. The rising tensions in the Middle East, coupled with the market’s uncertainty, have contributed to increased demand for traditional safe-haven assets such as gold.
Gold traders will closely monitor key economic indicators including US Jobless Claims, the Philly Fed index, and Existing Home Sales, scheduled to be released on Thursday. Additionally, the market will be attentive to a scheduled speech by Fed Chair Powell. The market participants will take cues from this data and Powell’s remarks to identify potential trading opportunities related to gold prices.