Cautious anticipation of US data amid limited gains and escalating geopolitical tensions
Gold prices rose for the second consecutive day on Thursday, climbing back above $5,000 an ounce, supported by renewed geopolitical tensions and increased demand for safe-haven assets. Investors are awaiting key US economic data that could determine the future course of monetary policy.
Geopolitical tensions support gold's rise
The rise in gold prices came after reports that peace negotiations between the United States, Iran, Russia, and Ukraine ended without any significant progress, bringing geopolitical concerns back to the forefront.
Reports indicate that any potential US military action against Iran could escalate into a protracted campaign, which increases market uncertainty and drives investors toward safe-haven assets, primarily gold.
The precious metal has historically benefited from escalating political and military crises, as it is seen as a hedge against risk and market volatility.
The Federal Reserve limits gold's gains
Despite the geopolitical support, gold's gains remain limited due to continued uncertainty surrounding the direction of US monetary policy. The minutes of the Federal Reserve meeting revealed a division among monetary policymakers regarding the level of US interest rates, suggesting that the new chairman, scheduled to take office in May, will face difficulty in passing rate cuts.
The minutes stated that many policymakers expect productivity gains to curb inflation, but most participants cautioned that progress could be slow and uneven.
Some even indicated the possibility of raising interest rates if inflation remains above the target level.
The majority of policymakers favored keeping interest rates unchanged, given ongoing concerns about inflation stemming from tariffs.
In contrast, only two members supported a 25-basis-point rate cut, reflecting a split within the US central bank regarding the timing of the monetary easing cycle.
This divergence, coupled with the strength of the US dollar index, limited gold's ability to make further significant gains.
Seasonal factors weigh on demand
Short-term demand for precious metals was also affected by reduced liquidity in Asian markets with the approach of the Chinese Lunar New Year. A significant number of investors are absent from trading during this period, reducing trading volumes and limiting upward momentum.
Markets await crucial data
Investors are currently focused on the release of US GDP data, in addition to the Personal Consumption Expenditures (PCE) index, the Federal Reserve's preferred inflation gauge.
This data is expected to play a pivotal role in determining the direction of gold prices in the coming period, especially regarding expectations of interest rate cuts.
Gold price outlook
If geopolitical tensions persist and weak economic data emerges, gold may find additional support to continue its upward trend.
However, if the data shows continued inflationary pressures, this could reinforce the Federal Reserve's hawkish stance, potentially limiting gains for the precious metal.
This makes its movements in the coming days contingent on developments in both the political and economic landscapes.
