Gold Prices Steady Amid Geopolitical Tensions and Monetary Policy Uncertainty
Gold prices remained steady on Wednesday following recent record highs, as geopolitical risks in the Middle East countered pressure from a stronger U.S. dollar and higher Treasury yields.
The safe-haven appeal of gold was evident amid escalating tensions in the Middle East, which fueled demand despite headwinds from a firmer dollar and rising Treasury yields. The greenback's five-month peak made gold less attractive to investors holding other currencies. Benchmark U.S. 10-year Treasury yields hovered near a five-month high, reaching 4.6591 percent, adding pressure to gold prices.
Gold demonstrated resilience in the face of these challenges, with market participants seeking refuge from geopolitical uncertainties. Brewing tensions between Israel and Iran heightened concerns, leading investors to hedge their positions with gold. Any further escalation in geopolitical tensions could potentially drive gold prices to retest all-time high levels.
Moreover, uncertainty surrounding U.S. monetary policy added to market volatility. Top Federal Reserve officials, including Chair Jerome Powell, refrained from offering guidance on future interest rate cuts. They emphasized the need for continued restrictive monetary policy, diverging from expectations of imminent rate cuts. Data from the U.S. raised doubts about the likelihood of rate cuts this year, prompting several global brokerages to delay their rate cut forecasts from June to September.
According to the CME FedWatch Tool, the market is pricing in a 68 percent chance of a rate cut in September. Lower interest rates typically boost the appeal of holding non-yielding assets like gold, further supporting the precious metal's demand.
In a nutshell, gold prices maintained stability amid a complex backdrop of geopolitical tensions and uncertain monetary policy. While challenges from a stronger dollar and rising Treasury yields persisted, safe-haven demand and expectations of potential rate cuts provided support to gold prices.
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