Gold futures which had seen a remarkable rise from around $1,844 to $1,941, faced challenges as fears of higher U.S. interest rates resurfaced. The potential impact of Chair Jerome Powell’s address on Thursday was closely monitored for any hawkish signals, considering recent inflation trends. Higher interest rates typically have a negative effect on gold prices, limiting substantial gains even amid increased safe-haven demand. The release of retail sales data contributed to concerns about persistent inflation, potentially prompting a more hawkish stance from the Federal Reserve.

China’s better-than-expected growth in the third quarter, with a GDP increase of 4.9%, added positive economic data. However quarter-on-quarter growth remained below pre-COVID levels, indicating a slow economic recovery. Nevertheless, the positive indicators from China contributed to hopes of improved economic conditions, supporting the demand for gold.

Gold prices experienced a notable surge, reaching nearly a one-month high as tensions escalated in the Middle East due to the Israel-Hamas conflict. The uncertainty surrounding the conflict’s potential to draw in other Arab countries, leading to a broader regional war, increased demand for safe-haven assets, particularly gold. This week spot gold rose by 0.8% to $1,937.80 per ounce, while gold futures for December jumped 0.5% to $1,950.65 per ounce. However, in recent sessions, this demand for gold slightly subsided, especially with renewed fears of higher U.S. interest rates.

The Middle East conflict had initially boosted gold prices by 5% in the prior week. The crisis played a pivotal role reflecting the historical tendency of gold to perform well during geopolitical uncertainties. The yellow metal’s price movements showcase the complex interplay between global events, economic indicators, and monetary policy decisions, influencing investor sentiments and the demand for safe-haven assets.

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