Gold prices on COMEX rebounded from losses earlier in the day as escalating tensions in the Middle East aided safe-haven demand for the precious metal.
The Palestinian militant group Hamas said that its leader, Fatah Sharif and his family was killed in an Israeli airstrike in Lebanon Monday.
The news supported demand for safe-haven assets such as gold.
However, gold prices were under pressure in Asian trade today after the US Federal Reserve Chair Jerome Powell on Monday signalled a moderate pace in the central bank’s easing cycle.
Powell says Fed in no hurry to cut rates
On Monday, Fed Chair Powell said that interest rates may fall to a level that neither restricts nor boosts the economy, though the central bank is not in a hurry to cut rates further.
Powell said at the National Association for Business Economics Annual Meeting, Nashville, Tennessee:
Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course. The risks are two-sided, and we will continue to make our decisions meeting by meeting.
The US Fed at its last policy meeting cut interest rates for the first time in four and a half years by 50 basis points to begin its monetary policy easing cycle.
Gold prices have benefited from the interest rates cut as lower rates boost demand for the non-yielding yellow metal.
“If the economy slows more than we expect, then we can cut faster. If it slows less than we expect, we can cut slower, and that’s really what’s going to decide it. But I think from a base case standpoint, we’re looking at it as a process that will play out over some time, not something that we need to go fast on,” Powell said on Monday.
Gold market focuses on key US economic data
The market will be eagerly waiting for the release of key economic data from the US during this week.
The ADP non-farm employment change data is expected on Wednesday, while unemployment claims in the US will be out the next day. Additionally, the official employment change by the US Bureau of Labor Statistics will be released on Friday.
Traders will be assessing these data points to understand the direction of the monetary policy easing cycle of the Federal Reserve in the months to come.
“The moderation in job growth and the increase in labor supply have led the unemployment rate to increase to 4.2 percent, still low by historical standards. We do not believe that we need to see further cooling in labor market conditions to achieve 2 percent inflation,” Powell said.
Gold prices still near record highs
Even though the US Fed has hinted at a slower pace in its monetary policy easing cycle, gold prices are still likely to benefit from lower rates.
Neils Christensen, editor at Kitco.com, said in a report:
Gold has managed to maintain its purchasing power, achieving broad-based gains and reaching all-time highs against major currencies like the euro, the British pound, the Canadian dollar, and the Australian dollar.
Gold prices have been hovering around $2,650-$2,660 per ounce over the last few days, which is not far away from the record high of $2,696.90 per ounce hit last week.
At the time of writing, the most-active December gold contract on COMEX was 0.2% higher at $2,665.45 per ounce.
Christensen added:
Although gold prices encountered some resistance at all-time highs above $2,680 an ounce last week, many analysts expect the precious metal still has plenty of upside as the Federal Reserve now leads central banks in a global interest rate easing cycle.
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