Gold gains support despite strong dollar
The recent surge in gold prices is against the backdrop of intensifying tensions in the Middle East, and there has been an increase in buying gold as a safe asset. Traders are also awaiting the next U.S. Consumer Price Index (CPI) report, which could shape expectations for future Federal Reserve interest rate decisions.
A strong dollar has traditionally been a headwind for gold, but gold has shown resilience. This suggests that even though the dollar is on an upward trajectory, some investors are hedging against ongoing geopolitical risks.
The dollar index (DXY) rose to its highest since mid-August, but the impact on gold was limited.
Fed interest rate outlook and market sentiment
Minutes from the September meeting of the US Federal Reserve revealed mixed feelings among policymakers. A majority supported a 50 basis point (bp) rate cut, citing progress in curbing inflation towards the 2% target.
However, due to concerns about strong economic growth and low unemployment, a few members advocated reducing the 25 basis points cut.
Dallas Federal Reserve Bank President Laurie Logan took a cautious stance on the economic outlook, suggesting that more cautious interest rate cuts would be desirable in the future. Similarly, Boston Fed President Susan Collins reiterated the need for a flexible, data-driven approach to monetary policy.
