Gold firms for third day on Mideast conflict, hopes of Fed rate pause

Oct 19 – Gold gained for a third consecutive session on Thursday as growing tensions in the Middle East sparked safe-haven demand, while remarks from Federal Reserve Chair Jerome Powell fuelled hopes the US central bank may pause rate hikes.

Spot gold rose 1.3% to USD 1,973.41 per ounce by 2:58 p.m. ET (1858 GMT). US gold futures settled 0.6% higher at USD 1,980.50.

Israel pounded Gaza with more air strikes, as British Prime Minister Rishi Sunak followed US President Joe Biden on visits to demonstrate support for the war against Hamas while urging Israel to ease the plight of besieged Gazans.

While gold has gained due to the war, “buying exhaustion is fairly imminent,” said Daniel Ghali, commodity strategist at TD Securities.

Powell walked a narrow line in his remarks, leaving open the possible need for more rate hikes because the economy had proved stronger than expected, but also noting emerging risks and a need to move with care.

“The market is not taking this as a hawkish stance by any means. It looks like there are too many risks to the outlook of the economy and this will likely support gold prices,” said Edward Moya, senior market analyst at OANDA.

Traders now see a 70% chance of no rate hike in December compared with a near 50% chance before Powell’s remarks, according to CME’s FedWatch Tool.

Higher interest rates increase the opportunity cost of holding gold, a non-yielding asset.

“Any signs of deteriorating data in the US is required to get discretionary interest into the precious metal, which has been a large missing piece. Recession would allow Fed to cut rates and help prices move north of USD 2,100,” Ghali added.

Spot silver rose 0.1% to USD 22.89, platinum was up 0.5% at USD 889.92 and palladium fell 1.5% to USD 1,112.12.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Krishna Chandra Eluri and Shailesh Kuber)