The price of gold rose by 0.8% after falling by 1.1% yesterday. The price recovery was caused by increased demand for safe haven assets, a weaker U.S. currency and lower U.S. Treasury yields.
The ongoing uncertainty surrounding the outcome of the US presidential election and tensions in the Middle East have increased demand for gold, considered a safe haven asset. Kamala Harris and Donald Trump are in a tight race, with less than two weeks until the Nov. 5 presidential elections. Meanwhile, Israel launched strikes on Damascus (the capital of Syria) and a military facility near the western city of Homs.
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 0.24% to 104.18. The yield on 10-year US bonds fell by 4.6 basis points to 4.196%, reversing gains after topping the 4.25% threshold yesterday as traders continue to digest the trajectory of interest rate cuts. According to the CME FedWatch Tool, markets see a 90.9% probability of a 0.25% rate cut at the November meeting (compared to 87.7% a week earlier) and a 68.3% probability of a 0.25% rate cut in December (compared to 71.7% a week earlier), with a 0.41% rate cut expected by the end of the year. Lower rates reduce the opportunity cost of holding non-yielding bullion.
Overall, experts expect that the upward trend of gold will continue until the end of 2024, given the continuing geopolitical risks, the cycle of easing the Fed's monetary policy and the purchase of precious metals by Central Banks.