Gold prices surged to a fresh record high on Wednesday as conflicts in the Middle East and uncertainty surrounding the upcoming U.S. Presidential election spurred demand for safe-haven assets.
In the UAE, gold rates gained AED1.75 with 24-carat gold rising to AED333 and 22-carat gold reaching AED308.25. In addition, 21-carat reached AED298.50 and 18-carat gold hit AED255.75.
Globally, spot gold rose 0.08 percent to $2,751.2 as of 5:37 GMT after hitting a record $2,752.38 earlier in the session. Meanwhile, U.S. gold futures increased 0.16 percent to $2,764.20. In the past year, gold has gained over 39 percent.
U.S. presidential election
Both presidential candidates in this year’s election are advocating for policies that could contribute to inflationary pressures, a factor that is expected to be highly supportive of gold prices. Historically, gold has served as a hedge against inflation, and with both candidates outlining fiscal plans that could stimulate price increases, investor interest in the precious metal is likely to remain strong.
What has particularly caught the market’s attention is the rising likelihood of former President Donald Trump reclaiming the White House in the November 5 election. His potential return has fueled speculation about the reintroduction of tariffs or other trade-related measures that could generate inflation by raising the cost of imported goods.
Fed rate cuts
The U.S. dollar climbed to its highest level since early August, supported by growing expectations that the Federal Reserve may opt for smaller interest rate cuts in the near future. A stronger dollar tends to weigh on commodities priced in the currency, such as gold, making them more expensive for holders of other currencies. This has had a notable impact on gold prices, which typically move inversely to the dollar.
At the same time, the rise in the dollar has contributed to a surge in U.S. Treasury bond yields, with the benchmark 10-year Treasury yield reaching a three-month high. Higher yields tend to reduce the appeal of non-interest-bearing assets like gold, as investors can find better returns in interest-bearing securities.
The Federal Reserve began its rate-cutting cycle last month with a 50-basis-point reduction, a significant step to address economic uncertainty and stimulate growth. However, the likelihood of another large cut in November has diminished considerably, with market participants now expecting a smaller move.
According to the CME FedWatch tool, traders currently assign an 88.9 percent probability to a more modest 25-basis-point cut. Lower interest rates typically enhance the attractiveness of non-yielding assets like gold because they reduce the opportunity cost of holding such assets compared to interest-bearing investments.
Looking ahead, traders are eagerly awaiting key economic data and signals from Federal Reserve officials. The upcoming release of U.S. existing home sales data will provide insight into the health of the real estate market, a critical component of overall economic stability. Additionally, market participants are closely watching a scheduled speech by Richmond Fed President Thomas Barkin, hoping for further clarity on the Fed’s outlook for monetary policy.
Geopolitical risks
Gold prices have surged to an all-time high as geopolitical tensions continue to escalate, particularly with the ongoing year-long conflict in the Middle East showing no signs of resolution. Diplomatic efforts, aimed at ensuring peace and stabilizing the region, have thus far failed, leaving investors deeply concerned about the potential for further instability and broader economic repercussions.
This prolonged uncertainty has impacted investor sentiment, pushing many to seek refuge in safe-haven assets like gold, which is traditionally viewed as a store of value in times of political and economic turbulence.
The persistent nature of the conflict, coupled with its failure to reach a resolution, is likely to keep the upward pressure on gold prices in the near term, as investors brace for continued volatility and seek protection in this traditional safe-haven asset.
Read: Oil prices decline amid rising U.S. inventories, ongoing Middle East tensions
Other precious metals
As gold prices set a new record high, the precious metals market saw mixed movement with spot silver dipping 0.32 percent to $34.72 per ounce and platinum gaining 0.52 percent to $1,034.52. Palladium also rose 0.46 percent to $1,080.81.
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