Gold to more historical highs as dollar weakens

21 Ağustos 2024

Today’s market analysis on behalf of Samer Hasn, Senior Market Analyst at XS.com

Gold to more historical highs as dollar weakens, hopes for Middle East ceasefire falter

Gold continued its advance today and reached more historical highs, touching $2,529 per ounce in spot transactions and $2,570 for COMEX gold futures contracts.

Gold’s gains come with bets on more Fed signals about cutting interest rates, which markets are getting this week, especially from Jerome Powell’s speech in Jackson Hole. The absence of hope for a ceasefire in Gaza, which may keep the specter of regional war in the air, also preserves the yellow metal’s upward momentum.

Markets expect Fed officials, led by Powell, to speak this week about their comfort with starting to cut interest rates, especially in September, keeping bond yields and the dollar under pressure to decline, which is what pushes gold towards more gains.

The Dollar Index is close to erasing all of this year’s gains, reaching 101.6 points, while the 10-year Treasury yield is nearing to its lowest levels this year, at 3.83% today.

Markets are currently expecting a cut of up to a full percentage point this year, according to figures provided by the CME FedWatch Tool.

However, this narrative could eventually lead to a correction wave for gold this week in the context of selling the news. Markets appear to be pricing in the expected outcomes of Powell’s speech.

In the Middle East, the focus is on the completion of negotiations in Cairo to cease fire in Gaza. Despite the statements that are constantly coming out from senior US administration officials, they are being met with greater skepticism from various parties and those familiar with this thorny file.

US Secretary of State Antony Blinken spoke of holding “constructive negotiations” with Israeli Prime Minister Benjamin Netanyahu. US President Joe Biden said that we are closer than ever to reaching an agreement.

But despite the optimism in official statements, Israeli officials themselves have expressed doubts about achieving a breakthrough through the new proposal presented by the US last Friday, according to The New York Times. Hamas accuses the United States of having presented a proposal that only meets Israeli demands, according to The Washington Post.

Biden and Blinken had talked about bridging the gaps between Hamas and Israel in the recent negotiations, but in reality, this was only bridging the gap between the US and Israel, according to Axios. The major points of contention, a permanent ceasefire, an Israeli withdrawal, and control of border crossings, remain unresolved. Axios also quoted Israeli officials as saying that Netanyahu refused to provide enough space for the negotiating team to reach an agreement.

This comes despite Netanyahu’s approval of the US proposal and Hamas’s rejection of it. But even so, there are still many obstacles regarding the details of implementing the agreement and the parties’ commitment to it, according to what CNN quoted from an US diplomat.

 

Zaid Barem / YMM