HG MARKETS:

Gold prices have recently experienced a pullback due to heightened geopolitical risks following Iran’s missile strikes on Israel’s capital, Tel Aviv. Despite this volatility, the macroeconomic environment remains favorable for the precious metal, bolstered by a global decline in interest rates that enhances gold’s appeal as a non-yielding asset. Currently, gold is trading just below its all-time high of $2,685, reflecting its resilience.

Gold has long been regarded as a safe haven asset, especially during times of geopolitical turmoil. The recent escalation of conflict between Iran and Israel has heightened market uncertainty, prompting investors to seek refuge in gold. As tensions rise, the allure of gold’s stability becomes increasingly attractive, driving up demand. This instinctive move towards gold reflects its historical role as a protector of wealth in volatile times, underscoring its enduring value in a turbulent world. With geopolitical risks looming, gold remains a beacon for those looking to safeguard their investments.

Last week, gold saw an impressive rally of over 1% as market concerns centered on instability in the Middle East drove investors towards safe-haven assets. The combination of falling interest rates and geopolitical unrest has kept gold in the spotlight, with its performance closely linked to shifts in US monetary policy and the strength of the US dollar (USD). The precious metal surged as market expectations grew that the Federal Reserve (Fed) might implement a significant rate cut of 50 basis points at its upcoming November meeting. This speculation contributed to a weakening dollar, further propelling gold prices.

However, a wave of unexpectedly strong economic data, particularly regarding the US labor market, along with a cautious address from Fed Chairman Jerome Powell, has tempered those aggressive rate cut expectations. Just a week ago, the probability of a 50 basis point cut stood above 60%, but it has since dropped to around 37%.

Despite these fluctuations, gold has already soared more than 28% in 2024 and reached new record levels. Many analysts from major financial institutions believe that the upward trajectory for gold is far from over, particularly in the medium to long term. As investors navigate these uncertain waters, gold continues to shine as a compelling investment choice.