Gold extended its gains throughout the day today in light of increased risk aversion from market participants. The rise of the risk-off environment today comes courtesy of an explosion of a hospital in Gaza last night which saw both Israel and Palestine trade blame for the atrocity. The impact and fallout spurred renewed concern of a wider conflict which helped Gold accelerate toward the $1950/oz handle.
- Gold price trades with a positive bias for the third successive day on Thursday.
- Geopolitical risks continue to underpin demand for the safe-haven XAU/USD.
- Hawkish Fed expectations, rising US bond yields and stronger USD cap gains.
FED POLICYMAKERS, MIDDLE EAST TENSIONS AND US TREASURIES
The US has seen another week of upbeat data as retail sales smashed estimates. The result has seen a slight uptick in rate hike projections for the Fed at the December meeting. Meanwhile Fed policymakers have been out in force this week with many not ruling out additional hikes but rather reiterating the importance of the data ahead. Federal Reserve policymaker Waller stated today that a slowdown in the real economy could see the Fed hold rates steady. If there is one thing many analysts seem to agree on is that higher for longer narrative continues to grow from strength to strength.
Another positive according to the Fed is the longer dated US treasuries which continue to advance. The US 10Y yield has hit multi-year highs this week and printed a fresh 2023 high with Fed policymakers believing a higher yield on longer dated treasuries could do some of the heavy lifting for them. As you can see on the chart below the US 10Y is now trading at levels last seen in in January of 2007.