Gold prices have entered a rangebound phase as investors closely monitor the unfolding tensions in the Middle East and the Federal Reserve’s signals of keeping interest rates higher for longer. While the potential escalation of the conflict between Israel and Iran fuels safe-haven demand, the prospects of no interest rate cuts in the near term are casting doubt on further gains for the yellow metal.
Last week, gold surged to record highs as safe-haven demand spiked after Iran launched a strike against Israel. The precious metal had dipped on Wednesday but recovered during the Asian session on Thursday.
As of 06:55 GMT, spot gold (XAU/USD) traded at $2,376.90 an ounce, with prices remaining in overbought territory. Despite strong inflation data and the Fed’s indications of higher rates persisting, which saw traders largely price out expectations for a June rate cut, gold’s safe-haven appeal could quickly reignite if Middle East hostilities escalate further.
However, the precious metal’s overbought status and lack of yield pose challenges for further gains if inflation persists. The tug-of-war between geopolitical risks and the prospects of “higher for longer” has left gold undecided on its next move.
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