The price of gold rose sharply at the beginning of today's trading, reacting to the news of Israel's attack on Iran. However, the precious metal soon lost all its earned positions, as Iran's restrained reaction reduced concerns about a broader regional conflict.
Sources said that Israel had struck Iranian territory, which was another clash between the two countries. Iranian media reported the explosions, but an Iranian official said they were caused by an air defense system. State media reported that three drones over the central city of Isfahan had been shot down.
Meanwhile, the negative dynamics of the US currency provides some support for gold. The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) fell by 0.09% to 106.06.
Analysts also said that even if geopolitical tensions decrease, gold may continue its rise against the background of purchases of precious metals by China.
At the same time, strong economic data and “hawkish” statements by representatives of the Federal Reserve System (Fed) reinforced expectations that interest rates will remain high for a long time. According to the CME FedWatch Tool, markets see a 18.6% probability of a 25 basis point rate cut at the Fed meeting in June, and a 45.5% probability of a rate cut in July (compared to 56.5% a week earlier). In addition, markets now expect a 39 basis point rate cut by the end of the year - that is, about two rate cuts, where at the beginning of the year they predicted six rate cuts. Higher interest rates increase the opportunity cost of holding non-yielding bullion.