In a turn of events, the price of gold (XAU/USD) has rebounded, breaking a three-day losing streak as it hovers above $1,950. The surge is attributed to escalating geopolitical tensions in the Middle East, which typically drive investors towards safe-haven assets like gold.
As of the early Asian session on Friday, gold is trading at approximately $1,958, reflecting a 0.03% gain for the day. This positive momentum comes despite the pressure from higher US Treasury bond yields, which usually has an inverse effect on the precious metal.
The surge in tension in the Middle East has played a pivotal role in boosting gold prices. Reports indicate that the White House announced Israel’s agreement to a temporary halt in military operations in parts of north Gaza for four hours daily. However, there is minimal evidence of an actual ceasefire, maintaining an atmosphere of uncertainty and risk, thus increasing the appeal of gold to investors seeking a safe refuge.
On the other side, the US Dollar Index (DXY) has surged to 105.90, driven by hawkish comments from Federal Reserve Chairman Jerome Powell. Powell’s remarks suggested a willingness to tighten monetary policy further if necessary, which has historically had the effect of bolstering the US dollar. The 10-year US Treasury bond yields are at 4.65%, with the 2-year yield reaching 5%, underlining the prevailing strength in the bond market.
Investors are closely watching the upcoming events that could influence the gold market. Federal Reserve’s Logan speech, the preliminary US Michigan Consumer Sentiment Index for November, and UoM 5-year Consumer Inflation Expectation are expected to provide clarity on the future direction of gold prices. Powell’s hawkish stance may cap the upside potential for the Dollar-denominated gold, creating a delicate balance between geopolitical risks and monetary policy dynamics.