Gold prices held slightly below record highs on Wednesday (April 17), as safe-haven demand driven by geopolitical risks in the Middle East offset the pressure on rising US dollar and US bond yields. As of press release, gold retested $2,390 to $2389.59 per ounce, which is not far from a record high.
US dollar and 10-year US Treasury yields both remained stable near five-month highs, making dollar-denominated gold less attractive to holders of other currencies and less attractive as bonds as investment options.
IG market strategist Yeap Jun Rong pointed out that in the face of rising US bond yields and the strengthening of the US dollar, gold prices have always shown resilience. At the same time, with geopolitical risks continuing to ferment, gold has received some support in safe-haven funds, and market participants are still nervous about Israel's response to Iran's attack.
The price of gold has risen by about 15% so far this year, partly due to safe-haven demand driven by the continuing escalation of geopolitical tension in the Middle East and Ukraine.
Jim Wyckoff, senior analyst at Kitco Metals, said that the gold market is in a suspended mode, waiting for the conflict between Iraq and Israel to progress. If the situation escalates, the price of gold will rise again. If the Middle East conflict abates, the focus of the market will shift to the Federal Reserve. Obviously, the Federal Reserve will not cut interest rates anytime soon, which is a negative factor for the gold and silver markets.
Following Iran's air strikes on Israel, Israel called for new sanctions against Iran on April 16. Israeli Foreign Minister Israel Katz said on social media that he has contacted more than 30 countries to push for sanctions against Iran's missile program.
Harshal Barot, a senior adviser at Metals Focus, pointed out that currently, the focus is purely on geopolitical aspects, which has prevented a pullback in gold prices. It is necessary to wait for geopolitical uncertainty to subside before markets begin to respond to macroeconomic fundamentals.
Federal Reserve Chairman Powell recently pointed out that inflation data has been rising unexpectedly for three consecutive months, making it difficult for policy makers to make decisions to relax policies immediately. As a result, central banks may need to keep interest rates higher for longer than originally anticipated.
Affected by this, the market's expectations for interest rate cuts this year have been drastically lowered to less than 2 times, which is far from the 6 interest rate cuts expected at the beginning of the year. Despite declining market confidence, the first rate cut is expected to take place in September.
Meanwhile, the two-year US Treasury yield tested 5% overnight. Currently trading at 4.9855%, the 10-year US Treasury yield remains at 4.6655% for nearly five months. This shows that market expectations for the Federal Reserve to relax this year are weakening.
Speaking about US debt, ING senior interest rate strategist Benjamin Schroeder said that Chairman Powell's attitude has changed. Although the current market reaction is unclear, this is expected to happen soon, or at least as part of the market adjustment process. Eventually, the 10-year US Treasury yield may return to around 5%. Given the current trend in inflation data, it is also reasonable if the market decides to further lower expectations for interest rate cuts in September.
Long-standing supporting factors, including strong purchases by central banks and increased consumer demand, are also supporting prices.
Deutsche Bank (Deutsche Bank) predicts that the price of gold will reach 2,400 US dollars per ounce by the end of the year and 2,600 US dollars per ounce by December 2025. It is believed that gold is likely to maintain a strong foundation, as early investors' profit settlements will be replaced by investments from investors who have not participated in this action until now, but conceptually agree with the gold price trend.