Gold prices edged higher on Friday, gaining approximately 0.3% as renewed geopolitical tensions in the Middle East increased demand for the precious metal as a safe-haven asset.
This increase follows Thursday’s steep sell-off, marking the metal’s most significant one-day drop since July. Gold futures are now trading in the $2,750s range, hovering below a key resistance level on the chart.
The recent rebound came after a Hezbollah rocket attack in northern Israel killed seven people, which dashed hopes for a ceasefire in the region and raised concerns over escalating conflict. With safe-haven buying intensifying, gold has attracted investor interest despite competing factors influencing its price, including a rising US dollar and fluctuating Treasury yields.
Despite the recent upswing, some market analysts warn that gold’s price recovery could be constrained by a strengthening US dollar, which resumed its upward trend after a week-long decline. Gold is primarily priced in dollars, meaning a stronger dollar can often limit gains in gold’s value by making it more expensive for buyers using other currencies.
The dollar’s rise is largely attributed to strong US employment data released earlier in the week, which led markets to scale back expectations of Federal Reserve interest rate cuts. Despite an unexpected dip in job openings, solid private payroll figures and lower-than-anticipated unemployment claims signal a resilient labor market, further supporting the dollar.
Friday’s release of US Nonfarm Payrolls data is a focal point for investors, as it could impact the Federal Reserve’s approach to future interest rates. Analysts will examine job growth, the unemployment rate, and average hourly earnings to gauge the labor market’s strength. Any signs of a cooling labor market could encourage the Fed to reconsider its policy direction, potentially favoring gold by weakening the dollar.
Adam Koos, president of Libertas Wealth Management Group, noted that gold is currently navigating a challenging landscape of competing factors, with safe-haven yields and investor liquidity needs sometimes adding pressure to the metal’s value. Although gold has historically benefited from market uncertainties, Koos highlighted the “push-and-pull” dynamics at play as high yields and Treasury rate increases provide an alternative safe-haven appeal.
Technically, gold is trading within a range, having dropped from its recent all-time high of $2,790 earlier in the week. The yellow metal’s broader trend remains upward on most timeframes, which may support future gains. However, some analysts suggest that further declines could occur if it falls below key support levels, with additional technical resistance likely near $2,800 and $2,850.
In addition to Middle East tensions, upcoming US election uncertainties may contribute to heightened volatility in gold prices. Political shifts could influence investor sentiment, impacting demand for safe-haven assets like gold amid broader economic concerns such as rising interest payments on national debt and ongoing inflation fears. As the US election approaches, the direction of gold prices may hinge on the results and their perceived impact on market stability.
Market Watch and FX Street contributed to this report.
