Gold resumes its gains

24 Temmuz 2024

Gold resumes its gains amid focus on the course of the presidential race in the US and further escalation in the Middle East

Today’s market analysis on behalf of Samer Hasn Market Analyst and part of the Research Team at XS.com

Gold is heading to stop its streak of losses extending for four consecutive days today and rise by 0.5%, reaching the level of $2,408 per ounce for spot prices.

Gold’s recovery comes amid further escalation in the Middle East, with the absence of real signs of calm, in addition to more concerns about the possibility of a recovery in the Chinese economy, in addition to continued high hopes about the Fed cutting interest rates. While these gains come despite the resumption of the dollar’s recovery.

This also comes amid preoccupation with developments in the presidential race in the United States, which witnesses sharp turns from time to time.

In Gaza, there is nothing new except the ongoing escalation, with new evacuation orders for residents in Khan Yunis and a narrowing of the humanitarian zone, according to The New York Times. At the same time, Prime Minister Benjamin Netanyahu is preparing to meet with the highest-ranking US administration officials and to deliver a speech to Congress this week. This is in order to mobilize more support in light of the international isolation and voices denouncing the military operations. While this visit may not receive attention at this time and uncertainty, according to what The Times also reported. This comes amidst the preoccupation with developments in the presidential elections in the US after the withdrawal of Joe Biden and the focus of the spotlight on Camilla Harris as a potential alternative candidate for the Democratic Party.

On the other hand, Netanyahu said that an agreement that would return the prisoners is close, and this statement comes before the resumption of negotiations today. However, Hamas believes that Netanyahu aims to procrastinate in negotiations, which he uses as a means to calm the Israeli interior, according Reuters.

This procrastination has been mentioned by many reports previously, as Netanyahu is counting on Donald Trump’s return to the White House to free Israel’s hand in the region.

This would prolong the war and keep fears – as high as ever – of the major escalation in the South Lebanon front, according to The Times as well.

Therefore, I believe that the coming days may be among the fateful days in the course of the Middle East war. If Harris is unable to obtain sufficient support from the American voter, this will push Netanyahu to adhere to his bet on Trump’s return and thus further procrastination and stumbling in the negotiations. I believe that this geopolitical narrative of continuous escalation will preserve gold’s luster as a safe haven in times of crises.

Gold is also gaining more luster with the return of fears again about the future of the Chinese economy, with pessimism about the future steps that the government may take to support growth. These fears were also reflected in a sharp decline in Chinese stocks, as the CSI 300 index recorded its worst daily performance this year, with a decline of more than 2%.

This pessimism comes after the document issued after the ruling Communist Party’s meeting on Sunday, which did not meet the high expectations that were hoped that the major crises facing the economy would be tackled, according to The Wall Street Journal. This also comes despite the unexpected interest rate cut by the People’s Bank of China, which it said was to support the real economy.

This weak sentiment about the ability of the Chinese economy to recover may keep the appetite for possession of gold coins high among individuals there, especially with the continued weak appetite for real estate investment, which is witnessing a continuous contraction in prices.

Farther away, back in the US, continued high optimism – bordering on certainty – about the possibility of a rate cut in September and another cut that could follow in November or December provides gold with more support to keep its gains. The probability of a 25-basis point cut in September is 90% and more than 40% for another cut of the same amount for both November and December, according to the CME FedWatch Tool.

 

Zaid Barem / YMM