Gold prices witnessed a significant rise during Thursday’s trading, as a result of the yellow metal bullion benefiting from important economic and political transformations. The dollar and US Treasury bond yields witnessed a sharp decline, against the backdrop of the US Federal Reserve’s recent decision regarding interest rates, which it issued yesterday evening.
Gold prices have been positively affected by the decline in the value of the dollar, as investments in gold have become more attractive for investors looking to take advantage of those declines. This comes in the context of expectations that the Federal Reserve will remain conservative in raising interest rates, which will reduce opportunities for high returns in other assets.
Besides the economic impact, political concerns in the Middle East continued to push gold prices higher. Tensions and conflicts continued in the region, prompting investors to resort to the safe haven of investing in gold.
Overall, it seems that gold benefited from these multiple factors, and its prices rose significantly during those transactions. It is worth noting that gold is often considered a safe haven in times of economic and political instability, which is reflected in the increase in demand for it in such periods.
Regarding today’s trading, gold prices witnessed a noticeable rise. Spot gold contracts rose by about 0.93% to reach $1,990.76 per ounce. A similar rise was recorded in gold futures contracts for delivery in December, increasing by an estimated 0.59% to reach $1,999.20 per ounce.
Regarding the prices of metals other than gold, they witnessed various changes during trading. Spot silver prices rose by an estimated 0.54% to $23.07 per ounce. As for platinum, spot platinum contract prices fell by about 1.12% to $916.73 per ounce. As for spot palladium contracts, they rose by about 0.45% to reach $1,117.50 per ounce.
Federal Reserve Governor’s statements raise gold prices
The recent statements of US Federal Reserve Governor Jerome Powell, during the Federal Open Market Committee press conference on Wednesday evening, led to a recovery in gold prices after they had fallen to their lowest level in more than a week. This decline in gold prices is due to the losses witnessed during the previous three sessions.
Jerome Powell indicated some optimism about the US economy during the press conference, which had a positive impact on gold asset markets. This is what pushed gold prices to rise after a period of continuous decline.
Regarding gold’s performance, this rebound is partly due to the increasing demand for the safe haven that gold offers in light of global economic and political tensions. It is also possible that the rise is a result of investors’ expectations regarding the Federal Reserve’s directives regarding its future monetary policy.
After the Federal Open Market Committee meeting ended yesterday, a decision was made to keep the interest rate unchanged at 5.50%. This is the second meeting in a row in which the US Federal Reserve decided not to raise interest rates, but at the same time the bank confirmed its readiness to raise interest rates at any of its upcoming meetings if the need arises. He pointed out that this matter still remains on the table.
These decisions and statements greatly affected the gold market, as gold witnessed a rise in its prices after the announcement of the decision to keep interest rates unchanged. This rise reflects investors’ expectations regarding the direction of the US Central Bank regarding its monetary policy in the future.
Gold futures gained on lower dollar and Treasury yields
Gold futures prices in US currency rose today as a result of the decline in the value of the dollar and the decline in US Treasury bond yields. This rise is due to investors’ expectations that the Federal Reserve may have reached the peak of its current interest rates. This forecast is based on the delayed effects of a series of decisions by the Federal Reserve to tighten monetary policy in recent years, which have not yet fully emerged.
Pressures have increased on the banking sector, housing and real estate sectors as a result of the Federal Reserve’s tightening policy.
The dollar index, which measures the performance of the US currency against a basket of 6 other major currencies, also witnessed a decline of 0.74%, reaching the level of 105.92 points. This is the lowest level for the dollar in the past ten days, since October 24. This decline in the value of the dollar means that the cost of holding gold has become lower for investors who own other currencies, in contrast to the US currency.
In the same context, US Treasury bond yields witnessed a sharp decline during recent trading. Benchmark 10-year bond yields fell nearly 3% in just one day, reaching their lowest level in more than two weeks at 4.650%. This is after the yields on these bonds exceeded 5% earlier this week.
This decline in Treasury bond yields indicates a decline in demand for them as a result of investors’ expectations about the future of monetary policy and the US economy. Bond yields are linked to interest rates, and the price of a bond usually rises when its yields fall, and vice versa. Therefore, falling bond yields could signal expectations of a slowing economy or interest rate cuts by the Federal Reserve.
Gold climbs as rate stability expectations weaken the dollar
CME Group’s FedWatch tool currently indicates that there is a 80% probability that the US Federal Reserve will hold the federal funds rate at its next meeting scheduled for December. With regard to raising the interest rate, the probability is only 20%.
In another context, data released today on weekly unemployment claims in the United States, which includes the period ending October 27, revealed an unexpected increase in the number of new applications. This unexpected rise negatively affected the value of the US dollar, causing its value to decline.
In light of this unexpected rise in unemployment claims, gold markets saw an increase in profits. Gold is usually a safe haven for investors during times of economic or political tension, and its demand increases when signs of a slowdown in the economy appear or when confidence in the national currency declines.
Rising holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, are usually considered a positive indicator of investor sentiment in the global gold market. The increase in the fund’s holdings indicates an increased demand for investing in gold as a safe haven and a value reserve in light of volatile economic conditions and financial stability.
Hence, this rise in the holdings of the SPDR Gold Trust by 0.2% on Wednesday can be interpreted as a positive signal for the sentiment of investors who are looking for safety and stability in their investments during the current period. This rise is attributed to escalating economic and geopolitical tensions that make gold an attractive option for investors.
US non-farm payrolls data is of great importance in financial markets and reflects the state of the US economy. This data is expected to provide further signals about the market direction and its impact on the Federal Reserve’s interest rate decisions.