Key Takeaways

  • Gold was supported by investors seeking haven trades amid Middle East conflict
  • Fed Chair Jay Powell’s speech prompted investors to seek safe-haven bets

Gold’s Growth

Gold throttled past the $1,985/oz mark Friday morning, with futures notching up 0.71% to over $1,990/oz. The gains boast highs not seen since May, with a thriving two weeks solidly in the green, and a nice four-day winning streak. In all, the glimmering commodity is riding on gains of at least 2.4% this week alone, and 3.22% for the month.  The ongoing strife between Hamas and Israel has triggered a surge in the precious metal, traditionally considered a “safe haven” during periods of uncertainty. As the situation continues to unfold, investors are seeking out more secure options.  Federal Reserve Chair Jay Powell’s comments on the key interest rate during his speech at the Economic Club of New York (ECNY) on Thursday may also have influenced market sentiment towards the yellow metal. In a dramatic scene, climate change activists Climate Defiance stormed the stage in protest moments before Powell was to deliver his statement. The demonstrators were escorted out, and Chair Powell took his place at the podium for the first time since COVID-19.  During Powell’s address, he dropped hints that the Federal Reserve doesn’t plan on hiking interest rates any higher during their Oct. 31 – Nov. 1 meeting. With that said, rates may stay higher for longer as Powell claims that he and his colleagues are “resolute in returning inflation to 2%”, but are “proceeding carefully”, leaving the door open for rate hikes by the end of 2023 based on incoming data. With that, gold becomes a more attractive asset to hold, as it is typically considered a hedge against inflation.   In light of this, only 1.7% of polled participants believe that the Fed will actually increase their interest rate at their next get-together, according to the CME FedWatch tool.

Marching On

Meanwhile, the Dow Jones Industrial Average closed 0.75% lighter after Thursday’s session. The broad-based S&P 500 declined 0.9%, while the tech-heavy Nasdaq took the heaviest blow with a loss of 1%.  As this week closes out, we can look ahead to next week’s economic calendar. September’s US Personal Consumption Expenditure (PCE) data is to be released next Friday. The print will offer insight into inflation across a range of consumer expenses and will reflect any changes in consumer behavior. To summarize, traders should consider the impact of the ongoing Middle Eastern war on gold prices, as well as monitor the Fed’s interest rate timeline. If in doubt, protect your trades with tools such as stop loss. By learning about these risk management tools, you can shield yourself from potential losses in a turbulent financial landscape.