Gold gleams despite rate hike expectations

Gold prices climbed on Thursday, defying expectations of pressure from rising US interest rates, Reuters reported. Instead, concerns over a potential escalation in the Middle East conflict bolstered the safe-haven appeal of the precious metal.

Spot gold rose 0.6 per cent to $2,374.97 per ounce at 0429 GMT, nearing its all-time high of $2,431.29 set last week. Analysts, like Kelvin Wong of OANDA, attributed the rise to the uncertainty on the geopolitical front.

US gold futures edged 0.1 per cent higher to $2,389.70, as per the statement.

Tensions flared as Israel vowed to defend itself following attacks from Iran. Western nations urged restraint, but the situation underscored the potential for a wider conflict.

While higher US interest rates typically dampen demand for non-yielding assets like gold, these concerns overpowered that effect for now.

However, Wong cautioned that a potential pullback might occur as the market adjusts to the possibility of sustained higher rates.

Federal Reserve officials, including Chair Jerome Powell, have recently hinted at the possibility of keeping rates elevated for longer than initially anticipated.

This shift in stance is leading traders to adjust their expectations, with bets on rate cuts diminishing.

In contrast to the Fed’s stance, European Central Bank officials like Mario Centeno indicated a more gradual approach to rate hikes. They stressed that even after potential increases, monetary policy would remain tight.

Silver prices echoed the rise in gold, climbing 0.6 per cent. Platinum remained flat at $938.40, while palladium saw a modest increase of 0.2 per cent to $1,027.82 per ounce.