Gold prices are rising, here’s why

Gold prices saw a notable increase on Thursday, driven by escalating tensions in the Middle East which bolstered the metal’s status as a safe-haven asset.

Despite the ongoing pressures from the likelihood of sustained high U.S. interest rates, spot gold ascended by 0.8%, reaching $2,379.21 per ounce by 0713 GMT.

This rise comes after gold peaked at an all-time high of $2,431.29 the previous Friday. Concurrently, U.S. gold futures also saw a slight increase of 0.2% to $2,394.10.

Geopolitical influences on Gold prices

The recent comments from Israeli Prime Minister Benjamin Netanyahu underscored the geopolitical risks that are inflating gold’s appeal.

Netanyahu emphasized Israel’s autonomy in defense strategies amid increasing hostilities with Iran, prompting a flight to safety among investors, which typically benefits gold.

What do experts say?

David Morrison, a Senior Market Analyst at the FCA regulated firm Trade Nation, commented,

“Gold’s advance appears more solid, if less spectacular. Silver is also higher this morning, and making inroads into yesterday’s losses. Both metals are back in favour with investors, but there are still plenty who don’t trust this rally. We’ve seen several attempts to knock down gold and silver over the last week or so. But both have proved remarkably resilient so far. Despite this, there’s always the possibility that a bigger test of the current rally could be just around the corner.”

US interest rate impact

The possibility of enduring high-interest rates in the U.S. also impacts gold prices.

Typically, higher interest rates diminish the allure of non-yielding assets like gold.

However, recent statements from Federal Reserve Chair Jerome Powell suggested that interest rates might remain elevated longer than previously anticipated, adding a layer of complexity to the gold market dynamics.

Moreover, futures traders have adjusted their expectations, now forecasting less than 50 basis points in rate cuts for 2024, with the initial reduction potentially occurring in September. This revision in expectations could underpin gold prices moving forward.

Investment trends

According to ANZ Research, ongoing disinvestment in gold-backed exchange-traded funds continues to influence the market.

The analysts noted that the current low investment levels in gold suggest limited potential for significant sell-offs, while simultaneously indicating considerable room for new buying activities.

Precious metals prices

In tandem with gold, other precious metals also experienced gains. Spot silver increased by 1% to $28.5 per ounce. Meanwhile, platinum and palladium rose by 0.3% and 0.9% to $940.65 and $1,035.50 per ounce, respectively.

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