Gold price is sitting at the highest level on record above $2,700 early Friday, with the latest uptick led by China’s stimulus optimism and a broad-based US Dollar (USD) pullback. The focus now shifts to the Middle East geopolitical updates and Fedspeak for further trading impetus. Gold price eyes Mideast tensions, Fedspeak The USD retreats from over two-month highs against its six major rivals in Asian trades on Friday, as buyers take a breather after the recent rally back by the market’s optimism that Republican nominee Donald Trump is set to win the 2024 US presidential elections. Trump’s fiscal and trade policies are seen as inflationary and positive for the Greenback. Besides, markets witness a positive shift in risk sentiment, as the mixed Chinese growth and activity data combined with the People’s Bank of China’s statement have rekindled stimulus hopes. The renewed market optimism also diminishes the Greenback’s appeal as a safe-haven currency. Therefore, Gold price receives a double booster shot, first from a broad USD retracement and then from expectations of further interest-rate cuts from China. Chinese central bank Governor Pan Gongsheng said that “depending on market liquidity, reserve requirement ratio (RRR) could be further reduced by 0.25 to 0.5 percentage points before the end of the year.” He noted that “the interest rate of 7-day reverse repo operation in the open market will be lowered by 0.2 percentage points,” adding, “It is expected that the loan market prime rate (LPR) could also fall by 0.2-0.25 percentage points.” A period of low-interest-rate regime tends to benefit the non-interest-rate bearing Gold price. That said, the European Central Bank (ECB) lowered key policy rates for the third time this year on Thursday but did not provide any forward guidance on the rates outlook. However, four sources close to the matter told Reuters a fourth cut in December is likely unless economic or inflation data turns around in the coming weeks. Meanwhile, US Retail Sales rose 0.4% in September after an unrevised 0.1% gain in August, the Commerce Department’s Census Bureau said on Thursday. Strong US data indicated robust economic prospects but that failed to alter the odds of a 25 basis points (bps) rate cut by the US Federal Reserve (Fed) in November. Markets are currently pricing in a 93% probability of such a move by the Fed next month. Additionally, Gold price found fresh haven demand amidst escalating geopolitical tensions between Iran and Israel. Iran-backed militant group, Hezbollah, said it will escalate war with Israel after Israel’s Foreign Minister confirmed the killing of Hamas leader Yahya Sinwar on Thursday. Looking ahead, all eyes remain on the speeches from several Fed policymakers and the rife tensions in the Middle East for further upside in Gold price. The end-of-the-week flows could also play its part in driving the volatility around Gold price. Credit: FXStreet
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