- The price of gold gains land to around $ 3,425 in Friday’s Asian session, adding 1.15% in the day.
- Israeli Prime Minister Netanyahu said that operations against Iran will continue for many days.
- Geopolitical risks and the increase in the expectations for cutting the Fed rates support the yellow metal.
He Gold price (Xau/USD) rises to maximums of more than five months around $ 3,425 during Friday’s Asian negotiation hours. The increase in geopolitical tensions in the Middle East and the increase in expectations on cuts of rates of the Federal Reserve (Fed) provide some precious metal support.
Israel’s Minister of Defense, Israel Katz, said Thursday night that there had been a “preventive attack against Iran” and declared an emergency state while the country prepared for reprisals. Israel’s Prime Minister Benjamin Netanyahu declared early that Israel’s goal is to eliminate the nuclear threat in Iran, since not doing so could cause a career by other countries in the Middle East to obtain nuclear weapons, according to CNN. Netanyahu added that the operation will continue for as many days as necessary.
“Gold rises for the second consecutive day, largely due to high geopolitical risks. If gold exceeds $ 3,400 again, minor obstacles remain at $ 3,417 and $ 3,431 – but a breakout towards new historical maximums seems likely to ultimately probable,” said Peter Grant, vice president and senior strategist of metals in Zanier Metals.
The inflation data of the US Production Price Index (IPP) softer than expected, published on Thursday, have raised the prospects for a rate cut by the Federal Reserve (FED). This, in turn, weighs on the dollar and supports the price of raw materials called in USD.
The operators now expect a rate cut of 25 basic points (PBS) for September, with another likely similar movement in October. Before the IPP data on Thursday, the operators projected that the Fed would wait until December to deliver a second rate cut.
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.
