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2024/11
Wisunofx Market Update: Why Didn't Gold Prices Drop After Israel-Lebanon Ceasefire Agreement?
Gold Prices Remain Stable Amid Geopolitical Concerns
During the Asian trading session, spot gold remained within a narrow range, trading at around $2632.67 per ounce. On Tuesday, gold prices stabilized after briefly dipping to $2605.13 per ounce, marking the lowest point of the week.
Previously, a ceasefire agreement between Israel and Lebanon had reduced some of the immediate risk, which typically would have lowered demand for gold as a safe-haven asset. However, concerns over the situation in Ukraine and potential tariffs under U.S. President-elect Donald Trump’s administration have limited the downward movement of gold prices. Ultimately, gold closed at $2633 per ounce, a slight increase of about 0.29%.
Key Insights:
- Geopolitical Uncertainty Persists: While the ceasefire eased some immediate tensions in the region, broader political instability in the Middle East remains. The Israel-Lebanon conflict is just one of many issues in the region, and ongoing geopolitical risks continue to support gold as a safe-haven asset. Despite the temporary relief, overall risk sentiment has not dissipated.
- Inflation and Economic Data: Gold is closely tied to inflation concerns and monetary policy. Market expectations of U.S. economic slowdown and potential monetary easing, particularly the possibility of rate cuts by the Federal Reserve, are keeping gold in demand as a hedge against inflation. The upcoming release of the U.S. PCE price index is seen as a key data point. If inflation pressures persist, it could further support gold.
- Weak Dollar: Gold typically moves inversely to the U.S. dollar. Recently, the dollar has weakened due to uncertain U.S. economic prospects and expectations of looser monetary policy from the Federal Reserve. A weaker dollar makes gold cheaper for holders of other currencies, which further drives gold prices up.
- Strong Global Demand: There is still strong demand for gold globally, particularly from central banks and investors seeking to protect themselves from economic and political instability. Many central banks continue to increase their gold reserves, and investors are using gold to hedge against stock market volatility and instability in other risk assets.
Upcoming Risk Events Affecting Gold Prices:
- New Zealand Central Bank Rate Decision: The Reserve Bank of New Zealand is expected to cut rates by 50 basis points, which will lower the opportunity cost of holding gold and could support higher gold prices. Typically, rate cuts prompt investors to shift toward non-yielding assets like gold.
- S. Economic Data: Key economic data releases in the New York session, including the third-quarter GDP revision, October durable goods orders, and the October PCE price index, could impact gold. Positive economic data might fuel expectations of rate hikes by the Federal Reserve, potentially putting pressure on gold.
- S. Thanksgiving Adjustments: Due to the U.S. Thanksgiving holiday on Thursday, the weekly initial jobless claims report will be released today, which could have a short-term effect on market sentiment and gold prices.
Conclusion:
Despite the Israel-Lebanon ceasefire easing some geopolitical tensions, gold prices have not seen significant declines due to the ongoing uncertainties in Ukraine and concerns over Trump’s trade policies. These factors continue to drive demand for gold as a safe-haven asset. As of Tuesday, gold closed at $2633 per ounce, up 0.29%, reflecting the market’s focus on global risks.
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