Earlier this week, the price of gold fell as signs of reducing political tensions in the Middle East diminished appetite for the precious metal. In a statement, the Israeli ambassador to the United States revealed that Israel was possibly days away from a cease-fire agreement with Hezbollah of Lebanon.
This comes after Israel breached the country’s borders on October 1st, an escalation of the Israel-Hezbollah conflict.
TD Securities’ Global Head of commodity strategy Bart Melek explained that there was a positive risk-gold relationship, noting that a reduction in risk resulted in a decrease in the price of gold. Bullion saw its price drop to $2615.58 per ounce, representing a 3.7% reduction. Spot gold also saw its price drop to $2621.85 per ounce, representing a 3.5% decline.
Palladium, platinum and silver also saw their prices decrease, with the Bloomberg Dollar Spot Index dropping by 0.5%. This year, gold prices have been propped up by escalating concerns about the wars in the Middle East as well as the Russia-Ukraine war.
Despite this reduction of risk in the Middle East, investors are still focused on where the Central Bank’s easing policy will go, given the recently released resilient economic data. Swap traders expect that the Federal Reserve will reduce rates of interest in the next month, while hedge funds decreased their bullish bets on gold prior to the Ukraine war intensifying last week.
This less dovish path suggests that gold may likely record a decline while the dollar strengthens in this atmosphere.
Data released this week may also offer clues on the path the Central Bank will likely take on rate cuts. This includes expenditure data on personal consumption, consumer confidence, and minutes of the Federal Reserve’s recently held meeting.
Trump’s choice for Treasury Secretary, Scott Bessent, is also viewed as a measured pick that would bring more stability to the financial markets and American economy. This nomination has eased worries over the president-elect’s inflationary agenda, which would decrease the allure of gold as a hedge against increasing prices.
Giovanni Staunovo, a commodity analyst with UBS Group AG, posits that Bessent’s nomination may have played a role in gold’s price decrease.
Even with the drop though, the precious metal has seen its price rise by over 25% thus far into the year, supported by the Central Bank’s pivot to rate cuts and its purchases. Some banks still maintain a positive outlook, with UBS and Goldman Sachs expecting additional gains next year.
The long-term outlook for gold is indeed bullish and mining firms like Emperor Metals Inc. (CSE: AUOZ) (OTCQB: EMAUF) (FRA: 9NH) are unlikely to be fazed by this drop in the price of the precious metal.
NOTE TO INVESTORS: The latest news and updates relating to Emperor Metals Inc. (CSE: AUOZ) (OTCQB: EMAUF) (FRA: 9NH) are available in the company’s newsroom at https://ibn.fm/EMAUF
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