Gold prices rose to a 3-month high on Friday amid strong demand for safe haven assets fueled by fears of war between Israel and Hamas, while somewhat mixed signals on US interest rates also kept the dollar from rising. and Treasury yields.
The yellow metal was set to rise for a second week in a row, with gold futures closing in on the $2,000-an-ounce mark as fears of escalating conflict in the Middle East fueled demand for traditional safe havens.
Gold was supported by some weakness in the dollar overnight and Treasury yields, as Fed Chairman Jerome Powell said the recent jump in yields was tightening financial conditions and possibly reducing the need for more Fed action.
While Powell still left open the possibility of another rate hike this year, the market took his comments as a sign that the Fed will not raise interest rates again. That prompted some profit-taking in the dollar while yields also pulled away from multi-year highs, although the 10-year yield still remains near the 5% level.
However, lower yields and a weaker dollar have boosted gold prices, as well as increased demand for a safe haven amid uncertainty over the war between Israel and Hamas. The market is keeping an eye on a planned Israeli ground offensive against the Gaza Strip, which could mean an escalation of the conflict.
While spot gold rose 0.1% to $1,977.14 an ounce, December expropriation gold futures rose 0.4% to $1 by 12:53 a.m. ET (0453 GMT). 989.05 per ounce. Both benchmarks are up nearly 2.5% this week after rising more than 5% the previous week.
However, with Powell still leaving room for further rate hikes, the yellow metal’s rally could be limited, especially if more economic indicators point to a resilient US economy and stagnant inflation.
Containing inflation remains the Fed’s main goal, and although inflation has fallen significantly over the past year, it still remains well above the 2% target set by the US central bank.
The US rate will rise even longer, potentially exceeding 5% until at least the end of 2024, which portends further pressure on low-yielding assets such as gold.
Copper falls amid ongoing concerns about China
Among industrial metals, copper prices fell further on Friday and fell for a third week in a row amid ongoing concerns about major importer China.
Copper futures fell 0.5% to $3.5680 a pound and are down 0.1% this week.
While copper received some support this week from better-than-expected Chinese GDP data, the trend was largely offset by lingering concerns about China’s property sector, particularly amid signs that property developer Country Garden Holdings (HK: 2007 ) will default on its offshore bonds.
On Friday, China’s central bank also kept its benchmark lending rate at a record low as it tries to strike a balance between boosting economic growth and containing the weakening yuan.
