Gold Prices Surge After Fed Hints at Rate Cut; Safe Haven Demand Rises Amid Middle East Tensions

Gold prices steadied in Asian trade on Thursday after surging close to record highs in the prior session following the Federal Reserve’s indication of a possible interest rate cut in September. The yellow metal also saw increased safe haven demand amid heightened concerns over a potential escalation of conflict in the Middle East, triggered by the killing of Hamas leader Ismail Haniyeh in Tehran.

Spot gold steadied at $2,446.41 an ounce, while gold futures expiring in December rose 0.7% to $2,490.15 an ounce by 01:26 ET (05:26 GMT).

The surge in bullion prices on Wednesday, nearing a record high of $2,483.78 an ounce, came after the Fed kept interest rates steady, as widely expected. Fed Chair Jerome Powell hinted at the possibility of a rate cut in September, citing progress towards lower inflation and a cooling labor market. Market expectations for a 25 basis point cut in September were almost fully priced in, according to CME Fedwatch.

Lower interest rates are favorable for gold as they reduce the opportunity cost of investing in non-yielding assets. Investors are also closely watching key nonfarm payrolls data for July, scheduled for release on Friday.

Other precious metals had mixed performances, with platinum futures falling 0.2% to $984.40 an ounce, while silver futures rose 0.5% to $29.070 an ounce.

In contrast, industrial metals faced challenges, with copper prices experiencing a rebound stall after more negative economic data from China, the top copper importer. Benchmark copper futures on the London Metal Exchange rose 0.2% to $9,243.50 a tonne, while one-month copper futures fell 0.3% to $4.1833 a pound.

Recent purchasing managers index data from China indicated a slowdown in manufacturing activity, with the Caixin manufacturing PMI showing an unexpected contraction in the sector for July. This data added to concerns about the Chinese economy, as the government reading from Wednesday also pointed to a similar trend.

Copper prices had rebounded from five-month lows on Wednesday on positive comments from Beijing, but the weak PMI data raised hopes for additional stimulus measures. However, Thursday’s data suggested that more support would be necessary to bolster the economy.

Overall, the outlook for gold remains positive, supported by potential rate cuts and geopolitical tensions. Investors will continue to monitor economic indicators and central bank decisions for further guidance on precious metals and industrial metals markets.

In conclusion, the dynamics in the gold market reflect a mix of factors, including central bank policies, economic data, and geopolitical developments. The impact of these variables on gold prices underscores the importance of staying informed and adaptable in the ever-changing financial landscape.