While Middle East tensions persist, gold remains close to its historical highs. The rising tensions in the Middle East have caused traders to be cautious, which has kept the price of gold (XAU) high.
Potential repercussions for dealers
Concerns over escalating hostilities between Israel and Hezbollah have been raised by reports that Israel's air force is hitting Hezbollah infrastructure in eastern Lebanon. Furthermore, Ayman Safadi, the foreign minister of Jordan, said in a recent interview that Israel's reaction to Iranian strikes might turn into a regional conflict. Israeli Prime Minister Benjamin Netanyahu highlighted Israel's right to self-defense in the face of these events, defying international appeals for moderation. As a result of the U.S. Dollar Index (DXY) decrease and the lowered yield on U.S. Treasury bonds, investors holding foreign currencies found gold to be more affordable.
Loretta Mester, the head of the Federal Reserve (Fed) Bank of Cleveland, declared on Wednesday that U.S. inflation is higher than anticipated. She stated that additional proof is required by the Fed to guarantee that it is headed towards a 2% inflation rate that can be sustained. Furthermore, Fed Chairman Jerome Powell pointed out that the robust economic data this year indicates only modest advancement towards the regulator's inflation target, implying that further time may be required on the part of the central bank to reach it. In other words, if U.S. interest rates stay high, the demand for non-yielding assets like gold may decline. His comments suggested a potential hawkish attitude on future monetary policy.
During the Asian and early European trading sessions, XAUUSD increased. The U.S. Jobless Claims data at 12:30 p.m. UTC and the U.S. Existing Home Sales report at 2:00 p.m. UTC are the two major events that traders should be watching today as they have the potential to cause volatility in all USD pairs to spike. A drop in home sales and a greater-than-expected increase in unemployment claims data may be signs of a contracting labour market and a slowdown in consumer spending. The likelihood of two rate cuts by the Fed this year could be increased by weak economic statistics, which would enhance the price of gold. On the other hand, better house sales statistics and lower-than-expected unemployment claims figures would point to a healthy labour market, which would put downward pressure on XAUUSD. Gold spot might challenge support at $2,354 an ounce, and if it breaks below that level, it might fall as low as $2,332, according to Reuters analyst Wang Tao.
