Gold rises and the dollar and yields also go up

Gold Prices Rise as Mideast Tensions Boost Safe Haven Demand

On Tuesday, gold prices surged, holding close to record highs as safe-haven demand maintained, underpinned by concerns about exacerbating Iran-Israel tensions.

In the Asian afternoon session, gold futures in June delivery rose by 0.10% to $2,385.50 per troy ounce. However, spot gold declined by 0.59% to $2,369.10 per troy ounce.

Although the precious metal had seen substantial gains in the previous two weeks, primarily driven by heightened demand for safe-haven assets.

Moreover, the recent surge in the value of gold was mainly driven by escalating geopolitical tensions in the Middle East following Iran’s attack on Israel over the weekend. Reports suggest that Israel is poised to retaliate soon.

Concerns of an all-out conflict involving Iran and Israel may involve other regional players, the US, and its allies.

Such fears bolstered demand for gold, a traditional safe-haven asset prized for its stability during turmoil.

Moreover, central bank purchases, particularly in emerging markets, also contributed to gold’s support amid mounting apprehensions of a global economic downturn in 2024.

Analysts observed that the anticipation of multiple interest rate cuts by the Federal Reserve (Fed) in 2024 might have influenced the upward trajectory of gold prices.

Additionally, speculation about potential interest rate cuts by the Fed and a subsequent weakening of the dollar might be contributing to the yellow metal’s upward trend and reaching new highs.

Fed Rate Cuts Delay Likely to Restrain Gold Spike

Markets eagerly anticipate a speech from Fed Chair Jerome Powell later on Tuesday, hoping for insights into potential interest rate cuts this year.

However, reports show that based on recent inflation figures and consumer spending trends, the Fed’s present stance hints at a possible postponement of interest rate reductions. This scenario might bolster the dollar and constrain gold’s upward potential.

Furthermore, Powell’s speech follows robust inflation and retail sales figures, leading traders to dismiss the likelihood of an interest rate cut in June.

Consequently, some upward momentum in gold was curtailed as traders sought the dollar as protection against potentially prolonged higher US interest rates.

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