Gold prices bounced back on Wednesday after hitting a more than one-week low in the previous session, buoyed by a weaker dollar, despite easing geopolitical tensions that usually diminish gold’s safe-haven appeal failing to slow its upward momentum.
Spot gold surged 0.7 percent to $2,651.27 per ounce by 09:13 a.m. ET (1413 GMT). Meanwhile, US gold futures climbed 1.1 percent to $2,650.30. This rebound came after a dramatic $100 drop on Monday, marking the sharpest one-day decline in over five months, as safe-haven demand diminished following the announcement of a long-negotiated ceasefire between Israel and Lebanon’s Hezbollah.
Prices had fallen to their lowest level since November 18 in the last session. “It seems that the weaker US dollar is supporting gold prices today,” commented Hamad Hussain, Assistant Climate and Commodities Economist at Capital Economics. The dollar index dropped 0.8 percent, reaching a one-week low, which enhanced gold’s appeal for holders of other currencies.
“Looking beyond today’s price fluctuations, higher volatility might be expected for gold prices in the near future, particularly with the upcoming inauguration of Donald Trump and as the situation in the Middle East evolves,” Hussain added.
US President-elect Donald Trump pledged on Monday to impose tariffs on Canada, Mexico, and China, the United States’ three largest trading partners, leaving investors on edge. Uncertainty about the economic direction was also highlighted by Federal Reserve officials in the minutes released on Tuesday.
A weekly report on jobless claims indicated that many laid-off workers are facing prolonged periods of unemployment, potentially paving the way for another interest rate cut by the Federal Reserve in December. Markets currently estimate a 67 percent chance of a quarter-point rate cut in December. Non-yielding bullion typically benefits in a lower-interest-rate environment.
In other precious metals, spot silver increased 0.2 percent to $30.47 per ounce, platinum rose 0.3 percent to $930.75, and palladium remained steady at $977.54.
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