Gold is experiencing gains, trading in the $2,440s on Monday with a 0.45% increase from the previous day. This rise is attributed to a combination of heightened safe-haven demand due to escalating geopolitical tensions and growing speculation that the Federal Reserve (Fed) may soon cut interest rates. The prospect of lower interest rates benefits Gold, as it reduces the opportunity cost of holding this non-interest-bearing asset.
At the start of the trading week, fears of an intensifying conflict in Gaza have driven investors towards safe-haven assets like Gold. Israeli Defence Minister Yoav Gallant, as reported by Axios, has indicated that Israel anticipates a large-scale military attack from Iran, which could significantly escalate the conflict and threaten global stability.
In addition to geopolitical concerns, Gold is also gaining momentum as traders increasingly bet on the Fed cutting its main interest rate, the fed funds rate, in September. According to the CME FedWatch Tool, the probability of a 0.25% rate cut in September is 49.5%, while the chances of a 0.50% cut stand at 50.5%. These probabilities are calculated based on the pricing of 30-day fed funds futures.
The release of the US Consumer Price Index (CPI) data for July on Wednesday, followed by the Producer Price Index (PPI) data on Tuesday, could influence expectations about future interest rate changes and, consequently, impact Gold prices. The CPI is anticipated to have increased by 0.2% in July compared to the previous month, after a 0.1% decline in June for the headline figure (with a 0.1% rise in core inflation). If the actual figures exceed these expectations, it could undermine the assumption that the Fed will aggressively cut rates in September, potentially negatively affecting Gold prices.
Meanwhile, the PPI is forecast to have risen by 0.1% in July, following a 0.2% increase in June. Gold remains in a sideways trading trend, with the current movement being upward within this range. This trend is expected to persist until a significant breakout occurs. The narrowing range hints at a potential triangle pattern formation, although it is too early to confirm this.
London-listed company KEFI Gold and Copper plc (LON:KEFI) is an exploration and development company focused on gold and copper deposits in the highly prospective Arabian-Nubian Shield. The Company operates in Ethiopia and Saudi Arabia with projects including Tulu Kapi project, Jibal Qutman EL and Hawiah.
