The gold price has rebounded near $2,070 per troy ounce during the Asian session on Friday, regaining ground lost in the previous session. The recent strength of the US Dollar had dampened the appeal of the yellow metal. However, softer economic data from the United States has put a limit on the Dollar’s advance, leading to improved sentiment towards the precious metal.
The release of weaker-than-expected US economic data has raised expectations that the Federal Reserve will maintain a dovish policy stance in its upcoming monetary policy meetings. The surprise increase in US Initial Jobless Claims, reaching 218K for the week ending December 23, and the stagnant Pending Home Sales (MoM) for November, falling short of anticipated growth, have contributed to this sentiment.
The subdued yields on US Treasury notes, particularly the 2-year and 10-year yields standing lower at 4.26% and 3.84% respectively, are indicating a market sentiment anticipating lower Federal Reserve policy rates in the near future. This expectation is fueling investor risk appetite and contributing to the upward movement in gold prices.
The resurgence of major shipping firms in the Red Sea suggests a cautious step towards normalization in the region. However, concerns remain regarding potential disruptions such as the potential closure of the Gibraltar Strait by Iran. Traders are closely monitoring the geopolitical landscape in the Middle East as any developments in this volatile scenario have the potential to impact market sentiments and drive demand for safe-haven assets, including gold.
The gold price has demonstrated strength as the US Dollar faces challenges from softer economic data, subdued bond yields, and geopolitical risks. The improved market sentiment towards gold reflects the expectation of a dovish stance from the US Federal Reserve. Investors are closely monitoring economic indicators and geopolitical developments for further insights into the direction of gold prices.
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