Gold Price Analysis: Geopolitical Tensions Drive Bullion’s Safe-Haven Appeal
- Gold gains 0.67% in late session, remains above $2,600 despite monthly losses.
- Escalation in Russia-Ukraine conflict and Middle East tensions underline Gold’s safe-haven appeal.
- Market optimism grows for a 25 bps Fed rate cut in December, bolstering Bullion’s short-term prospects.
Geopolitical Factors Impacting Gold Prices
Gold’s price surged by 0.67% in the late North American session on Friday, maintaining its position above $2,600 despite monthly losses exceeding 3%. Geopolitical risks continue to influence price action, with the non-yielding metal fluctuating around $2,652 after hitting a daily low of $2,634.
Recent events in the Middle East, with Israel and Lebanon agreeing to a ceasefire, have eased tensions. However, both countries have accused each other of violating the agreement. The Israeli Army’s announcement of bombing a mobile rocket platform belonging to Hezbollah in southern Lebanon adds to the uncertainty in the region.
Gold prices could see further support following the escalation of the Russia-Ukraine conflict. Russia’s attacks on Ukraine’s energy infrastructure and threats of missile strikes are in response to the US and UK’s authorization of missile deployment inside Russia.
Impact of US President-elect Donald Trump’s Victory
Gold prices faced challenges in November after US President-elect Donald Trump’s victory on November 5. Some of his proposals, such as imposing tariffs and cutting taxes, are inflation-prone, leading to a strengthened Greenback with gains of over 2% in November.
Market sentiment improved with the selection of Scott Bessent as Treasury Secretary for the upcoming Trump administration, boosting Gold prices. Investors view Bessent as market-friendly, potentially moderating the impact of Trump’s trade policies.
Market Outlook and Fed Rate Cut Speculation
Market participants are optimistic about a 25 basis points Fed rate cut at the December meeting, with a 66% probability according to the CME FedWatch Tool. The Fed’s cautious stance on further easing, amid robust US economic data, suggests a potential pause in the easing cycle.
Daily Digest: Market Movements Impacting Gold Price
- Gold prices saw a recovery as US real yields dropped seven basis points to 1.92%.
- The US 10-year Treasury bond yield fell six basis points to 4.182%.
- The US Dollar Index (DXY) edged down 0.37% at 105.75, set to print gains of over 1.79% for the month.
- Latest US GDP figures and Core PCE Price Index indicate a robust economy, potentially pausing easing policies.
- Speculation on Fed rate cuts continues, with investors estimating 24 bps of easing by the end of 2024.
Technical Analysis: Gold Price Trends and Resistance Levels
Gold prices remain upwardly biased but contained within the 50 and 100-day SMAs, presenting key levels for buyers and sellers to watch:
- Buyers need to clear the 50-day SMA at $2,668 to test $2,700 and potentially reach $2,750 and $2,790.
- Sellers targeting below $2,600 could aim for the 100-day SMA and the November 14 swing low of $2,536.
Gold FAQs: Understanding the Precious Metal
Gold plays a significant role in history and modern finance, serving as a safe-haven asset and hedge against inflation and currency depreciation. Central banks hold substantial Gold reserves to support their currencies and boost trust in their economies.
Factors Influencing Gold Prices
- Geopolitical instability and economic uncertainties drive Gold prices higher.
- Inverse correlation with the US Dollar and Treasury yields impacts Gold price movements.
- Market sentiment, interest rates, and currency fluctuations also influence Gold prices.