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Highlights:
- Gold Prices Hold Steady: Despite reduced US rate cut expectations, gold remains stable amid Middle East tensions, trading around US$2,650.
- Geopolitical Tensions: Concerns over a potential Israeli strike on Iran following missile attacks help prevent major declines in gold prices.
- Milder Fed Cuts: Analysts suggest a softer pace of Fed rate cuts may limit gold’s support, though geopolitical risks and central bank buying continue to underpin the market.
Gold prices remained resilient this week, supported by persistent fears of an escalating conflict in the Middle East, despite reduced expectations for US interest rate cuts. As of Friday, the precious metal was trading at US$2,650, holding close to Monday’s level, with minimal fluctuation throughout the week.
The yellow metal faced pressure from stronger-than-expected US non-farm payroll data released on Friday, which reduced expectations of another 50 basis point rate cut by the Federal Reserve. This data suggested that the US economy added more jobs than anticipated in the previous month, leading to reduced expectations of aggressive monetary policy easing.
However, concerns about geopolitical tensions in the Middle East, specifically the potential for Israeli strikes on Iran following missile attacks earlier in the week, have provided a buffer against a sharp decline in gold prices. These concerns have driven demand for safe-haven assets, with gold benefiting from this flight to safety.
In late September, gold surged above US$2,680 as the combination of expected aggressive rate cuts by the Fed and increasing geopolitical tensions bolstered demand for the metal. Though the reduced likelihood of further steep rate cuts could limit future gains, the ongoing geopolitical uncertainty and central bank buying continue to lend support to gold.
Bas Kooijman, CEO of DHF Capital, remarked on the changing dynamics, noting that the “milder rhythm” of Fed rate cuts may reduce gold’s upward momentum. However, Kooijman emphasized that geopolitical risks and the potential for additional central bank purchases are factors that could sustain gold prices in the near term.
