The COMEX gold prices recovered from earlier losses as the escalating Middle East tensions boosted demand for safe haven metals.
Hamas, a militant Palestinian group, said its leader Fatah Shariff and his family were killed by an Israeli airstrike on Lebanon’s Monday.
News of the crisis fueled demand for gold and other safe-haven investments.
Gold prices are under pressure today in Asian trading after US Federal Reserve chair Jerome Powell announced on Monday that the US central bank would ease its easing cycle at a moderate rate.
Powell: Fed not in a hurry to reduce rates
Fed Chair Powell stated on Monday that the interest rate could fall to a point that does not restrict or boost the economy. However, the central bank was not in any hurry to further cut rates.
Powell spoke at the National Association for Business Economics annual meeting, Nashville, Tennessee.
If the economy continues to grow as predicted, then policy will gradually shift towards a neutral position. We aren’t on a predetermined course. We will make decisions at each meeting.
At its most recent policy meeting, the US Fed cut rates by 50 basis point for the first times in over four years and half to start its new monetary policy ease cycle.
The gold price has benefited as the lower interest rates have increased demand for this non-yielding metal.
If the economy slows down more than expected, we will cut back faster. We can also cut back if the economy slows down less than expected. That’s what will decide. Powell stated on Monday that, “from a basic case perspective, we are looking at this as a long-term process, and not a thing that needs to be done quickly.”
The gold market is focusing on US economic data
This week, the market is eagerly awaiting the US release of important economic data.
On Wednesday, ADP will release its non-farm Employment Change data. The next day the US Bureau of Labor Statistics will publish the official unemployment claims. The official US Bureau of Labor Statistics employment data will also be published on Friday.
These data points will help traders understand where the Federal Reserve is going with its monetary policy in the coming months.
The moderated job growth, coupled with the increased labor supply has led to an increase in the unemployment rate. This is still low by historic standards. Powell stated that he did not think we needed to see a further cooling of the labor market to reach 2 percent inflation.
Gold prices still near record highs
Gold prices will still benefit from the lower interest rates, even though US Fed hinted that it would be easing its policy more slowly.
Neils Christensen is the editor of Kitco.com. He said:
The gold price has maintained its buying power. It is now at all-time records against currencies such as the Canadian, British, Australian, and Euro.
The gold price has been fluctuating between $2,650 and $2,660 an ounce in the past few days. This is still not too far from the $2,696.90 record per ounce that was set last week.
The most active December gold contract at COMEX is now 0.2% higher, or $2,665.45 an ounce.
Christensen added:
Gold prices have been unable to reach their all-time highest levels above $2.680 per ounce, but many analysts believe the precious metal has plenty more upside, as the Federal Reserve is now leading central banks around the world in an interest rate easing campaign.
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