Gold prices edged higher in Asian trade on Thursday, buoyed by persistent demand for safe havens amid escalating geopolitical tensions. Despite a resurgence in the dollar and Treasury yields, the yellow metal held its ground, reaching a high of $1,993.79 earlier in the session before settling at $1,989.28 at 11:30 GMT.
Ongoing missile strikes on Gaza by Israel, coupled with threats of a potential ground assault, maintained safe-haven demand for gold. Investors flocked to the precious metal, traditionally seen as a hedge during times of uncertainty, amidst fears of a further escalation in the Israel-Hamas conflict.
However, gold’s stability might be short-lived. The market anxiously awaits the release of third-quarter U.S. gross domestic product (GDP) data later in the day. Analysts anticipate a sharp uptick in growth, potentially bolstering the dollar and increasing yields.
Furthermore, the Federal Reserve’s looming decision on interest rates adds another layer of complexity. While the Fed is expected to maintain rates during its upcoming meeting, officials have hinted at the possibility of at least one more hike this year. This stance, grounded in concerns over stubborn inflation and a robust economy, poses a threat to gold prices. Higher rates elevate the opportunity cost of investing in gold, potentially dampening its appeal for investors.
Adding to the market’s watchlist, the European Central Bank is set to convene later today. Although the ECB is likely to keep rates steady, signals indicating prolonged higher rates are anticipated, despite signs of an impending eurozone recession.
The delicate balance between geopolitical tensions and economic data leaves the gold market in a state of anticipation. Any de-escalation in the Israel-Hamas conflict could dent safe-haven demand, while strong U.S. economic indicators might bolster the dollar, challenging gold’s current resilience.
