Geopolitical Events Shaping Gold Prices: Key Factors to Watch

Geopolitical Events Shaping Gold Prices: Gold prices remained close to their highest levels ever on Thursday. This increase was driven by hopes that the Federal Reserve might cut interest rates in September. Recent discussions have raised expectations that the Fed could ease its monetary policy.

Federal Reserve's Recent Meeting

At its meeting on July 30-31, the Federal Reserve considered lowering interest rates but decided to keep them unchanged. Despite this, the conversation has led traders to expect a quarter-point rate cut next month, with a 20% chance of a more significant half-point reduction.

Impact of Fed Meeting Minutes

On Wednesday, gold prices continued to climb after the Federal Reserve’s July meeting minutes hinted strongly at a possible rate cut in September. The minutes showed that many officials thought easing policy would be appropriate if economic data supported it. This led to a weaker dollar, which fell to a seven-month low, and a drop in U.S. 10-year bond yields to a two-week low. Investors are eagerly waiting for Fed Chair Jerome Powell’s upcoming speech at the Jackson Hole symposium.

Gold Price Predictions

Prathamesh Mallya from Angel One expects gold prices to rise further as anticipation builds for Powell’s speech. The weaker dollar and lower bond yields are likely to support higher gold prices.

Geopolitical Events Influencing Gold

Several geopolitical events are also impacting gold prices. Experts from The Gold Bullion Company have identified key factors to watch:

1. Middle East Tensions
Gold prices spiked to record highs on October 7 due to rising violence in the Middle East. With ongoing conflict and the anniversary of Hamas' invasion of Israel approaching, further unrest could drive up gold prices as investors seek stability.

2.US Election
The November 2024 US election is another important event. While election outcomes usually don’t immediately affect gold prices, changes in economic, trade, and diplomatic policies from the new president could lead to price fluctuations. The global influence of the US may boost gold demand during this period.

3.Ukraine-Russia War
The ongoing Ukraine-Russia conflict, now in its third year, continues to create economic instability. Any further escalation or new sanctions could lead investors to buy gold as a haven, driving up prices.

4. China-Taiwan Tensions
China's increasing gold reserves have raised concerns about potential conflict with Taiwan. Rising tensions or actual conflict could have major global economic impacts, causing gold prices to rise as investors seek protection.

5. BRICS Summit
The BRICS nations have been significant gold buyers since 2022. Their upcoming summit in October will discuss economic and geopolitical issues, potentially challenging the dollar's dominance. This could impact gold prices as BRICS countries may use gold and oil to undermine the dollar.

Also read: IPO Alert: Things to know before investing in Orient Technologies Limited IPO

 6. Climate-Related Disasters

Climate change is affecting the gold market as well. Many gold-producing countries are also vulnerable to environmental disasters. Any disruptions in gold supply due to climate events could lead to higher gold prices.