Gold futures are seeing a positive trend as they trade higher for the fourth consecutive session. With prices aiming to surpass $2,000 per ounce, this would mark the highest level since the end of July.
Strong Performance of Gold Futures
In the Comex market, gold for December delivery climbed $7.40 or 0.4%, reaching $2,005.90 an ounce. This is a significant milestone, as the last time prices settled above $2,000 was on July 31. As indicated by Dow Jones Market Data, gold futures are expected to accomplish their highest finish since that date.
Factors Driving Gold Prices
The surge in gold prices is largely attributed to the emergence of chaos in Israel. Adam Koos, President of Libertas Wealth Management Group, affirms that the fear trade surrounding this situation has had a direct impact. Interestingly, despite inflation remaining relatively stagnant, interest rates and the U.S. dollar have continued to rise. Consequently, the success of gold cannot be solely attributed to these typical factors.
Safe-Haven Bid and Middle East Conflict
The recent advancement of Israeli forces towards Gaza City has sparked a safe-haven bid for gold. Jim Wyckoff, senior analyst at Kitco.com, underscores that the potential for a wider conflict in the Middle East further intensifies the support for gold prices.
The Crucial Question: Can Gold Surpass $2,000?
The foremost question that now arises is whether gold will break through the $2,000 level, and subsequently rise to $2,060, resulting in new highs. Koos believes that the outcome hinges on two factors: developments in the Middle East and the stance adopted by Jay Powell and the Federal Reserve.
Powell’s Influence on Gold Prices
If Federal Reserve Chairman Jerome Powell continues to adopt a hawkish stance and considers further rate hikes, gold will likely face significant headwinds. This is primarily due to the three major external drivers – the U.S. dollar, interest rates, and inflation.
On the other hand, if Powell adopts a more dovish approach, Koos predicts that gold prices will exhibit further strength. Given the significance of this week for the Federal Reserve, the outcome will undoubtedly be an interesting one to observe.
The U.S. central bank is expected to announce its decision on interest rates at the conclusion of its two-day meeting on Wednesday.
