Daily digest market movers: Gold price whipsaws after Israel’s attack against Iran
- Gold price surrenders the majority of intraday gains posted after the Israeli military responded to Iran’s attack, Reuters reports. A New York Times report quoted Iranian officials saying that the strike had hit a military air base near the city of Isfahan. However, the Israeli state has not confirmed the drone attack.
- The confirmation of the airstrike by Israel would deepen fears of Iran retaliating again, which would widen the war scope beyond Gaza. Investing in Gold becomes more appealing when geopolitical tensions escalate.
- Meanwhile, deepening uncertainty about when the Federal Reserve (Fed) will start reducing interest rates keeps limiting the upside in Gold. The CME FedWatch tool shows traders are pricing in the September meeting as the moment when the central bank could pivot to rate cuts. However, Fed policymakers refrain from providing a concrete time frame as inflation remains stubborn due to robust consumer spending and tight labor market conditions.
- On Thursday, Atlanta Fed President Raphael Bostic said the progress in inflation declining towards the 2% target will be slower than expected and conditions for rate cuts won’t be favorable for the central bank towards the end of the year. Bostic added he is comfortable being patient and not “in a mad dash hurry” for rate cuts because labor demand is robust and wage growth remains resilient.
- Separately, New York Fed President John Williams also delivered a hawkish interest rate guidance. Williams said he doesn't see the urgency for rate cuts and warned that the central bank is ready to hike again if the data suggests price pressures accelerate.
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