- The price of gold earns impulse up to around $ 3,445 in the first bars of the Asian session on Monday.
- The fears of a broader conflict in the Middle East increase the flows to safe shelters, supporting the price of gold.
- The operators now see an 80% probability of a Fed fees cut in September.
The price of gold (Xau/USD) attracts some buyers around $ 3,445 during Monday’s Asian session. The precious metal rises to more than a month due to the climbing of the tensions in the Middle East and the increase in bets due to a federal reserve rates (Fed).
Investors ignored the US optimistic data published on Friday. The data published by the University of Michigan on Friday showed that the consumer’s feeling index rose to 60.5 in June compared to 52.2 previous. This reading exceeded the 53.5 market consensus.
The renewed geopolitical concerns in the Middle East after an Israeli attack to Iran continue to support the price of gold, a traditional asset of safe refuge. Iranian officials stressed that they would respond “firmly to any adventurism” of Israel.
“Israel eliminating Iranian objectives is causing a little geopolitical fear in the market. Prices will be kept high in advance of what is to come, the reprisal of Iran,” said Daniel Pavilonis, senior market strategist in Rjo Futures.
The Fed is expected to maintain its policy rate in the range of 4.25% -4.50% at its June meeting on Wednesday. However, the operators now expect a cut of a percentage point for September. Before the US inflation data last week, the operators expected the FED to wait until December to make a second rate cut. The growing expectations of a feat cut of the Fed raise assets that generate interests such as gold.
FAQS GOLD
Gold has played a fundamental role in the history of mankind, since it has been widely used as a deposit of value and a half of exchange. At present, apart from its brightness and use for jewelry, precious metal is considered an active refuge, which means that it is considered a good investment in turbulent times. Gold is also considered a coverage against inflation and depreciation of currencies, since it does not depend on any specific issuer or government.
Central banks are the greatest gold holders. In their objective of supporting their currencies in turbulent times, central banks tend to diversify their reserves and buy gold to improve the perception of strength of the economy and currency. High gold reserves can be a source of trust for the solvency of a country. Central banks added 1,136 tons of gold worth 70,000 million to their reservations in 2022, according to data from the World Gold Council. It is the largest annual purchase since there are records. The central banks of emerging economies such as China, India and Türkiye are rapidly increasing their gold reserves.
Gold has a reverse correlation with the US dollar and US Treasury bonds, which are the main reserve and shelter assets. When the dollar depreciates, the price of gold tends to rise, which allows investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rebound in the stock market tends to weaken the price of gold, while mass sales in higher risk markets tend to favor precious metal.
The price of gold can move due to a wide range of factors. Geopolitical instability or fear of a deep recession can cause the price of gold to rise rapidly due to its condition of active refuge. As an asset without yield, the price of gold tends to rise when interest rates lower, while the money increases to the yellow metal. Even so, most movements depend on how the US dollar (USD) behaves, since the asset is quoted in dollars (Xau/USD). A strong dollar tends to keep the price of gold controlled, while a weakest dollar probably thrusts gold prices.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
