'Overbought' Gold Slips Again, But 'Tailwinds Blow' from Middle East War and Falling Interest Rates
Thursday, 10/03/2024 16:33
GOLD fell another $10 per ounce against a rising US Dollar on Thursday, slipping with Western stock markets as longer-term interest rates rose together with crude oil prices amid worsening threats of all-out war in the Middle East.
Almost 12 months to the day since Iran-backed Hamas fighters murdered nearly 800 civilians and another 380 police and army staff across southern Israel, "The phase of unilateral self-restraint has ended," Iran has told the USA, Al Jazeera reports, warning that any Israeli reprisal for
Tuesday's missile attack – launched in reprisal for Israel's assassination of senior Tehran allies in the Hezbollah militia in Lebanon – will be
met with an "unconventional response".
"Obviously, Iran is way off course," said US President Joe Biden last night, repeating Washington's support for Israel. But while Israel – now accused by Gaza's Health Ministry of killing over 41,000 people in its 12-month war against Hamas –
has "a right to respond...they should respond proportionally" and not target Iran's nuclear or oil facilities, he said.
Crude oil prices rose Thursday for a 3rd session running, nearing the highest since the end of August above $75 per barrel of European benchmark Brent.
Despite signs of weakening global energy demand and a growing supply surplus, the Opec+ cartel of 23 producer nations
made no changes yesterday to their plans for reviving oil production growth later this year.
"With geopolitical tensions worsening amid continuing uncertainty over the Fed's likely path [on US interest rates], the tailwinds for gold continue to exceed the headwinds and there is still plenty of upside scope," says precious metals analyst Rhona O'Connell at brokerage StoneX.
But thanks to
speculative bullish bets on Comex gold futures and options reaching 4.5-year highs, "this must make an overbought market subject to a short-term correction," O'Connell says, projecting support between $2505 and $2620 as gold begins "a much-needed correction."
The Dollar price of gold fixed at $2648 per Troy ounce in London on Thursday afternoon – down almost 1.0% since Federal Reserve chair Jerome Powell said Monday that the US central bank is not "in a hurry to cut rates quickly" following
last month's half-point start to its new rate-cutting cycle.
Euro gold prices also edged back, trading €5 below Monday's new benchmark high of €2408.
But
the UK gold price in Pounds per ounce leapt to new records above £2022 – exactly £400 higher for 2024 to date – after Bank of England governor Andrew Bailey said the central bank will
become "a bit more aggressive...a bit more activist" in cutting interest rates.
Losing 1.5 cents from yesterday, the Pound suffered its steepest dive against the Dollar of 2024 to date, dropping 2.3% from last week's 54-month highs above $1.34.
"Geopolitical concerns are very serious," Bailey went on. "It's tragic what's going on.
"From the point of view of monetary policy, it's a big help we haven't had to deal with a big increase in the oil price...My sense, from all the conversations I have with counterparts in the [Middle East] region, is that there is, for the moment, a strong commitment to keep the market stable."
World No.7 oil producer nation Iran today resumed civilian flights at its airports after suspending them amid Tuesday's missile attack on Israel.
But the EU's Aviation Safety Agency has advised European airlines to avoid Iranian airspace, and Dubai-based Emirates has cancelled all flights to Iraq, Iran and Jordan for 3 days over the "regional unrest".
"Israel will respond" to Iran's missile attack, said Israel's ambassador to the United Nations, Danny Danon, yesterday.
"It will be painful."
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