Gold has been seen gaining a bit of traction lately, so we thought it an ideal moment to update our readers on what's going on with the yellow metal.
War = Safe haven investing
Without commenting on the horrors of the newly-sparked Israel-Hamas war, it's clear that the ensuing geopolitical instability has given gold a bit of a boost.
At the time of writing, the price of gold has risen 6.3% since the Hamas attack on Oct. 7, reaching the highest price since the beginning of August, as investors flock to the yellow metal due to its reputation as a "safe-haven" investment.
And while the price of gold retraced sharply on the 15th, it seems to be maintaining a price above US$1,900 for the time being.
“Gold is holding up well because we still have a lot of uncertainty related to the Middle East and the potential for that to evolve into something very serious,” Saxo Bank head Ole Hansen told Reuters. “We need to see whether there is enough movement in bonds and dollar to support these current levels or any further escalation in the Middle East, is what is required to send gold prices higher.”
Jerome Powell's update: Stay the course
Part of gold's latest increase is due to Jerome Powell's update on Thursday. Though the Fed Chair neglected to state a specific policy path, he said the Fed will remain "resolute" as it works to bring inflation down to 2%.
“Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal,” he said. “We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters.” He added that he doesn't believe policy rates are currently too high.
The speech, in general, aligned with the "higher for longer" mantra that's been echoing. In response, futures market traders now do not predict any chance of a rate hike in November, and lowered the chance for a rate hike even in December.
Higher interest rates generally hurt gold prices, increasing the opportunity cost of holding the interest-free asset. So this position is reasonably good news for gold, though real gains will likely wait until rates decrease in some potentially distant future.
We'll keep a close eye
With turmoil in the Middle East and rate decisions imminent, gold has the potential to move quickly. We'll provide another update like this as soon as we can.
