On Thursday, gold rose as Middle East tensions offset the solid dollar after investors softened their forecasts for another US Fed interest rate reduction.
In the Asian afternoon session, the yellow metal’s futures for December contracts surged by 0.14% to $2,682.90 an ounce.
Analysts have observed a counterbalance between factors such as geopolitical tensions, shifts in monetary policy expectations, and the subsequent rise in the dollar.
In addition, Israel’s armed forces have urged civilians of over 20 southern Lebanese towns to evacuate immediately due to an ongoing attack after its worst losses in a year of fighting Hezbollah.
Experts also said that as Mideast tension has escalated, the market sort of toned down from anticipation of another Federal Reserve’s (Fed) considerable rate slash next month.
Meanwhile, the US central bank’s efforts to bring inflation back to its 2.00% target may take longer than anticipated, restricting how much the interest rate can be lowered.
Moreover, traders have backed away their bets for a 50-basis-point rate reduction next month to 33.00% from 49.00% last week.
Analysts also noted that if the Fed is more likely to raise rates by 50 bps, it could benefit gold, with potential declines if the opposite happens.
US Payroll Data Crucial for Rate Cut Decisions, Gold Prices
The market has focused on the US payrolls report to determine the Fed’s expected interest rate cuts in November.
Furthermore, Thursday’s data revealed that US services sector activity reached a 1-1/2-year high in September due to strong growth in new orders, though services employment declined. This signals a labor market slowdown.
Meanwhile, reports indicated that bullion is seen as a safe investment during political and financial uncertainty periods, and it performs well in a low-interest-rate environment.
The market’s attention will now shift to the upcoming US nonfarm payroll data. New York Fed President John Williams and Chicago Fed President Austan are scheduled to speak later.
