The strength of the US dollar and central bank demand support gold
Despite gold’s strength, the US dollar remains firm, hovering around its highest level since early August. The dollar’s stability is largely due to expectations that the Federal Reserve will be cautious about interest rate cuts in the coming months.
CME Group’s FedWatch Tool shows a 94.1% probability of a 25 basis point rate cut next month, already pushing U.S. bond yields to their lowest in more than a week. Meanwhile, central banks around the world continue to accumulate gold, a trend highlighted at the London Bullion Market Association’s annual conference.
This continued demand from central banks is supporting gold prices even as investors await key U.S. economic data, including retail sales and weekly unemployment claims, to identify near-term trading opportunities.
Economic and geopolitical factors driving the gold price
Economic factors also play a crucial role in gold’s rally. The recent decline in crude oil prices is expected to ease inflationary pressures, giving central banks more flexibility to cut interest rates. The European Central Bank is set to make its third interest rate cut this year, while a fall in UK inflation has raised expectations that the Bank of England will follow suit in November.
On the geopolitical front, tensions in the Middle East continue to fuel demand for safe havens such as gold. While market participants are closely monitoring these developments, they are also keeping an eye on China’s urbanization efforts, which could impact global economic sentiment.
With central bank policies and geopolitical risks shaping market conditions, the near-term outlook for gold remains bullish as investors look for stability amid uncertainty.