Gold prices have bounced back during the mid-North American session on Thursday after reaching a daily low of $2,638. The increase in gold's value is attributed to escalating fears surrounding the Israel–Iran conflict, coupled with a stronger US Dollar. Additionally, expectations for aggressive policy easing by the Federal Reserve have diminished, leading to a rise in US yields. Currently, XAU/USD is trading at $2,659.
Wall Street is experiencing losses due to heightened geopolitical risks. Market sentiment remains pessimistic as Israel has intensified its military actions in Lebanon following a significant missile attack from Iran on Tuesday. US President Joe Biden has also publicly indicated discussions with Israeli officials about targeting Iranian oil facilities, which contributed to a rise in bullion prices toward $2,650 and above.
Earlier data from the US showed a continued softening in the labor market, with the Department of Labor reporting an increase in unemployment benefit claims that exceeded expectations. The Institute for Supply Management (ISM) also indicated an improvement in business activity through the ISM Services PMI for September compared to August. Meanwhile, Factory Orders for August contracted, and traders are closely watching the upcoming US jobs report on Friday, which is expected to create volatility in financial markets.
Fed officials have also made headlines, with Atlanta Fed’s Raphael Bostic noting a potential shift in the natural employment rate to a lower level. Chicago Fed President Austan Goolsbee remarked that the latest inflation figures align with the Fed’s target, and the labor market is at full employment. He emphasized that the priority is not just about whether to lower rates by 50 or 25 basis points, but rather achieving a neutral rate over the next 12 months.
As traders have reduced their expectations for a 50 basis point cut in November, US Treasury yields continue to rise, with the 10-year Treasury note yielding 3.84%, up five basis points. Meanwhile, the US Dollar Index (DXY) is also tracking these developments closely.
