Gold prices surged to a one-week high on Wednesday, signaling bullish sentiment in the market. Despite that, investors turned cautious amid uncertainty surrounding the Federal Reserve‘s rate-cut trajectory, opting to await clearer signals before initiating fresh positions.
Spot gold witnessed a 0.22 percent increase recording $2,028.83 per ounce as of 08:01 GMT. Meanwhile, gold continuous contracts saw a 0.01 percent increase to $2040.01 per ounce.
In Dubai, 24-carat gold was priced at AED245.75 per gram, while 22-carat stood at AED 227.50 per gram.
Safe-haven appeal
Despite the cautious stance among investors, gold prices are supported by prevailing geopolitical tensions and a softer risk tone in the market. Heightened concerns over escalating tensions in the Middle East have bolstered the safe-haven appeal of the precious metal.
Moreover, market sentiment regarding Federal Reserve interest rate cuts in 2024 has influenced gold prices. With expectations of four 25 basis points rate cuts starting from June, investors have adjusted their positions accordingly. However, the resilience of the U.S. economy has tempered these expectations, contributing to elevated U.S. Treasury bond yields and limiting gains for gold. The yield on the benchmark 10-year U.S. government bond holds comfortably above the 4.0 percent mark. The upcoming FOMC meeting minutes could provide further insights into the Fed’s monetary policy stance.
Read: Saudi Arabia’s Aramco plans bond issuance in 2024
Global developments
Global developments, ranging from central bank actions to geopolitical tensions, continue to shape the outlook for gold prices. The People’s Bank of China’s decision to lower the five-year loan prime rate and hawkish signals from policymakers all contribute to market volatility and investor sentiment. Any indication of prolonged higher interest rates from the Fed may dampen gold prices. This highlights the interplay between macroeconomic factors and market sentiment.
As gold prices navigate through various headwinds and supporting factors, market participants remain vigilant for cues that could dictate future price movements.
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