Gold prices edged down on Friday but were on track for a weekly gain as investors sought safe-haven assets amid rising geopolitical tensions in the Middle East and the upcoming U.S. presidential election.
In the UAE, gold rates declined AED1 with 24-carat gold falling to AED330 and 22-carat gold reaching AED305.50. In addition, 21-carat reached AED295.75 and 18-carat gold hit AED253.50.
Globally, spot gold dipped 0.24 percent to $2,727.92 as of 5:13 GMT after hitting a record $2,758.37 on Wednesday. Meanwhile, U.S. gold futures fell 0.33 percent to $2,739.95.
U.S. presidential election
With less than two weeks before the November 5 U.S. Presidential election, opinion polls point to a tight race to the White House. This adds to a layer of political uncertainty, which, along with Middle East tensions, might continue to act as a tailwind for gold prices.
These elections are more dynamic and unpredictable than previous ones and with such volatility comes additional interest in gold, further supporting prices. Analysts noted that gold prices may reach $2,800 by the end of the year and exceed $3,000 in the next year.
U.S. dollar recedes
The U.S. dollar lost its recent momentum, retracting from the nearly three-month high amid rising bets for a smaller interest rate cut by the Federal Reserve. Traders no longer expect another 50-basis-point interest rate cut by the Fed at its November monetary policy meeting as the incoming U.S. macro data suggested that the economy remains on strong footing.
According to the CME FedWatch tool, traders are currently pricing a 97 percent chance of a 25-basis-point cut by the Fed next month. 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.
This decline in addition to deficit-spending concerns after the U.S. presidential election, led to a sell-off in the U.S. bond market and supported the benchmark 10-year treasury yield to a three-month high on Wednesday.
Geopolitical risks
Gold prices have recently 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. Negotiators will gather in Doha to prepare for renewed talks on a Gaza ceasefire deal.
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.
Read | UAE drives regional economic growth: Insights from LSE Deputy CEO
Other precious metals
As gold prices declined, the precious metals market fell with spot silver dipping 0.85 percent to $33.42 per ounce and platinum declining 1.34 percent to $1,012.55. Palladium also plunged 2.38 percent to $1,129.54.
Silver has started mirroring gold’s movement, benefiting from its dual role of monetary value and as an industrial metal with growth driven by the growth of photovoltaics.
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