On Tuesday, as Federal Reserve officials expressed widely dovish sentiments and tensions escalated in the Middle East, the price of gold soared to a historic high on the previous trading day, before stabilizing.
As of 02:27 GMT on Tuesday (10:27 PM EDT on Monday), spot gold was stable around $2,627.43 per ounce. On Monday, gold had hit a historical high of $2,635.29.
US gold futures also held steady at nearly $2,652.50.
According to Reuters, IG market strategist Yeap Jun Rong stated, “Overnight dovish comments from the Federal Reserve continue to support gold prices.”
On Monday, a minority of Federal Reserve officials opened the door for further rate cuts, pointing out that the current interest rates still severely impact the US economy.
Chicago Fed President Austan Goolsbee, speaking at a Q&A event, said, “We still have a long way to go in the next 12 months to bring rates down to a neutral level to maintain the current situation.”
Federal Reserve Chairman Neel Kashkari expects to cut rates by 25 basis points at each of the remaining two meetings of the central bank this year. He also mentioned that the actual path will be determined by future data.
After carefully reviewing the statements from Fed officials on Monday, traders will now focus on US personal consumption and initial jobless claims data later this week, which could influence the Fed’s view on future rate cuts.
According to the CME FedWatch tool, futures traders are already anticipating a 75 basis point rate cut by the end of 2024.
Gold with no yield is becoming the preferred investment during low-interest rate environments and geopolitical unrest.
Yeap Jun Rong explained, “The new front opened between Israel and Hezbollah in the Middle East has also led to some inflow of safe-haven gold to hedge against any broader regional conflicts and geopolitical risks.”
“The tensions in the region may remain elevated for an extended period, potentially keeping gold prices on an upward trajectory,” he said.
On Monday, the Israeli military launched airstrikes on Hezbollah bases in Lebanon. The Lebanese Health Ministry reported that the attacks caused at least 492 deaths and 1,645 injuries.
Hezbollah stated that it fired dozens of rockets at Israel, including at a military outpost in Galilee, and for the second consecutive day, attacked a Rafael defense facility in Haifa.
In other metals, spot silver rose by 0.6% to $30.84 per ounce, platinum rose by 0.7% to $962.47 per ounce, and palladium saw a slight 0.1% decline to $1,040.72 per ounce.
Gold prices have risen by 27% this year, supported not only by the demand for safe havens during ongoing conflicts in the Middle East and Ukraine but also by strong purchases from central banks worldwide.