Gold rises amid tensions in the Middle East

Gold prices rose on Monday as continued tensions in the Middle East and expectations that the Federal Reserve (the US central bank) will begin cutting interest rates later in the year increased the appeal of the precious metal.

According to Reuters, gold rose in spot transactions 0.3% to $2,309.24 per ounce by 0427 GMT. US gold futures gained 0.5% to $2,318.80 an ounce.

“Investors will look at the political situation in the Middle East and how the ongoing negotiations to reach a ceasefire agreement will proceed,” said Kelvin Wong, chief market analyst for the Asia-Pacific region at OANDA. If hopes for a truce diminish, gold will rise.”

The chances of reaching a ceasefire agreement in Gaza appeared to have diminished on Sunday in light of the Islamic Resistance Movement (Hamas) insisting on its demand to end the war in the Strip in exchange for the release of the hostages, and at the same time Israeli Prime Minister Benjamin Netanyahu refused to do so.

“Weak US data provides more policy flexibility for the Federal Reserve regarding lowering interest rates,” said Yip Jun Rong, market performance strategist at IG, paving the way for gold price stability.

Data on Friday showed that US job growth slowed more than expected in April, reinforcing expectations that the US central bank will start cutting interest rates later this year.

According to CME’s Fed Watch tool, markets expect 67% of US interest rates to be cut in September. Higher interest rates reduce the attractiveness of owning non-yielding gold.

New York Federal Reserve Bank President John Williams said on Friday that the 2 percent inflation target is “critical” to the Fed’s efforts to achieve price stability.

In terms of other precious metals, silver rose in spot transactions by $1.35 to $26.89 per ounce. Platinum lost about 0.7% to $948.97, and palladium rose 0.1% to $946.58.