Gold experiences an uptick amid escalating tensions in the Middle East; however, the Federal Reserve’s prudent perspective limits the extent of these gains. Gold prices experienced a modest uptick, driven by safe-haven demand in the context of escalating tensions in the Middle East. However, the extent of these gains was constrained by the Federal Reserve’s signals regarding a more gradual strategy for future rate reductions. Increased geopolitical tensions, especially regarding the possibility of U.S. engagement in attacks on Iranian locations, played a significant role in driving demand.
Gold prices experienced a modest increase on Thursday, buoyed by safe-haven demand in the context of ongoing uncertainty in the Middle East. However, the extent of these gains was limited as traders evaluated the U.S. Federal Reserve’s indication of a more gradual approach to future rate cuts. Spot gold experienced an increase of 0.3%, reaching $3,378.86 per ounce, as of 0033 GMT. U.S. gold futures experienced a decline of 0.4%, settling at $3,395.80.
Geopolitical tensions persisted as U.S. President Donald Trump on Wednesday did not clarify whether the U.S. would participate in Israel’s attacks on Iranian nuclear and missile facilities, leading to an exodus of residents from Tehran amidst the continuing air strikes. According to two U.S. officials who spoke to Reuters on Wednesday, the U.S. military has repositioned certain aircraft and naval vessels from bases in the Middle East that could be susceptible to a potential Iranian assault.
The Fed maintained interest rates on Wednesday, with policymakers still anticipating a reduction of half a percentage point this year, although they have moderated the tempo of forthcoming cuts. However, Fed Chair Jerome Powell cautioned against placing excessive emphasis on this outlook, warning of “meaningful” inflation on the horizon as elevated import tariffs are anticipated. Futures on the federal funds rate, which gauge the cost of unsecured overnight loans between banks, increased the likelihood that the Fed would recommence interest rate cuts at the September meeting, presenting a probability of approximately 64%.
Indicating persistent difficulties in the labor market, recent data revealed that the number of Americans submitting new applications for unemployment benefits decreased last week. However, this figure still aligns with a continued decline in labor market momentum in June and a general softening of economic activity. The U.S. dollar index appreciated against the majority of major currencies following the Federal Reserve’s decision to maintain interest rates at their current levels. An appreciating dollar renders gold priced in dollars more costly. Elsewhere, spot silver remained unchanged at $36.75 per ounce, platinum increased by 1% to $1,335.93, while palladium saw a rise of 0.6% to $1,054.40.