Gold prices inched up in Asian trading on Wednesday due to political unrest in South Korea, which generated some safe haven demand. However, traders remained cautious as they awaited further indications on U.S. interest rates.
Throughout the week, gold experienced some relief as concerns about a breakdown in the Israel-Hezbollah ceasefire also boosted safe haven demand. Nevertheless, gains in gold were limited by a surge in the dollar, fueled by uncertainty regarding the future of U.S. rates.
Gold futures rose 0.1% to $2,646.53 an ounce, while futures expiring in February also increased by 0.1% to $2,668.60 an ounce by 23:25 ET (04:25 GMT).
South Korea in the Spotlight after Aborted Martial Law Declaration
President Yoon Suk-Yeol of South Korea announced martial law on Tuesday, only to retract the decision swiftly following strong opposition from Parliament and citizens.
Parliament overwhelmingly voted against martial law, and the country’s opposition party called for Yoon’s impeachment, leading to the worst political crisis in South Korea since the 1980s.
The resulting political uncertainty in the region negatively impacted investor sentiment across Asia, prompting some investors to seek refuge in gold.
Additionally, escalating tensions between Israel and Lebanon contributed to safe haven buying, as Israel threatened to hold Lebanon accountable for the breakdown of its ceasefire with Hezbollah, leading to hostilities between the two parties.
Metal Markets Under Pressure from Strong Dollar Ahead of Powell’s Speech
Overall metal prices remained subdued on Wednesday as market participants awaited comments from Federal Reserve Chairman Jerome Powell for insights on interest rates.
Powell is scheduled to speak later in the day, just weeks before the Fed’s final meeting of the year.
Although the central bank is anticipated to cut rates by 25 basis points in December, the long-term rate outlook has become more uncertain due to persistent inflation and the Trump administration’s inflationary policies.
This uncertainty led to significant gains in the dollar, impacting metal prices across the board.
Other precious metals like silver and platinum saw little movement on Wednesday, while benchmark copper on the London Metal Exchange dropped by 0.3% to $9,096.0 a ton, and February copper fell by 0.2% to $4.1895 a pound.
Analysis:
The recent political turmoil in South Korea and escalating tensions in the Middle East have contributed to a rise in gold prices as investors seek safe haven assets amidst uncertainty. Additionally, the upcoming speech by Fed Chairman Powell has added to market volatility, impacting metal prices. Investors should closely monitor these developments to make informed decisions regarding their investments and financial strategies.