Gold prices (XAU/USD) remained stable during the European session, trading near $2,660, as investors digested weak U.S. economic data and rising geopolitical risks in the Middle East. Meanwhile, silver (XAG/USD) experienced a pullback, falling from $32.28 to $31.75. These movements reflect a growing risk-on sentiment among investors, driven by China’s economic stimulus, which has prompted a shift away from safe-haven assets like gold and silver.
However, ongoing Federal Reserve monetary easing expectations, coupled with heightened geopolitical risks, continue to support precious metals. With both gold and silver benefitting from a weaker U.S. dollar, further developments could lead to increased demand for these assets.
US Dollar Recovers Slightly Amid Strong New Home Sales Data
The U.S. Dollar Index (DXY) hovers around 100.78, recovering slightly from a low of 100.22, supported by stronger-than-expected New Home Sales data. Despite this recovery, weak economic indicators, such as the Richmond Manufacturing Index at -21 and Consumer Confidence falling to 98.7, have increased speculation of a 50 bps rate cut by the Federal Reserve in November.
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Key Events from Wednesday:
- New Home Sales: 716K units, exceeding expectations of 699K.
- Durable Goods Orders: Below forecast, highlighting manufacturing weakness.
While the dollar shows resilience, it remains under pressure, with attention focused on upcoming Fed decisions.
Geopolitical Tensions and Their Impact on Precious Metals
On the geopolitical front, escalating tensions in the Middle East, particularly between Israel and Palestine, have increased demand for safe-haven assets like gold and silver. Reports of rising casualties in Gaza and Lebanon have heightened investor concerns about further instability in the region.
This uncertainty has bolstered precious metals, as investors seek security during times of conflict and political turmoil.
Additionally, the looming U.S. presidential election adds another layer of uncertainty, driving more investors toward assets like gold and silver. Political risks in the U.S. combined with global conflicts suggest that demand for precious metals will remain strong in the coming months.
What to Expect: Key Events to Watch
Looking ahead, traders are eyeing key events that could influence the U.S. dollar and, consequently, gold and silver prices.
On Thursday, September 26, the U.S. will release its Final GDP figures for Q2, with forecasts holding at 3.0%. This will be followed by Unemployment Claims, expected to rise slightly to 224K from 219K. Any surprises in these reports could shift market sentiment and impact the dollar's trajectory.
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