Gains in gold are supported by geopolitical unrest, a declining dollar, and a dovish Fed

Gold futures basis the most active December contract gained $11 in trading today when compared to yesterday’s close and is fixed at $1875.30. Gold opened at $1875.40 and closed in essence unchanged creating a doji candlestick.

Gold was supported by dollar weakness and a decline in the yield of U.S. 10-year Treasury Notes. The dollar is currently trading lower by 0.24%, and the index is fixed at 105.555.

Comments emanating from Federal Reserve members have been refreshingly dovish. Coming out of the Atlanta Federal Reserve President, Raphael Bostic's comments provided this sentiment as he spoke to the American Bankers Association today. He was asked his position as to whether the Federal Reserve should implement additional rate hikes this year and he commented, “I actually don't think we need to increase rates anymore. “His latest comments reflect his belief that the central bank no longer needs to raise interest rates any further and anticipates that the outcome of recent hikes will not lead to a recession.

That being said over the last few days comments by Federal Reserve officials have underscored their resolve to take inflation to its 2% target as they differentiate between the fact that its monetary policy has moved inflation closer to its target still however giving no clues that they have finished the job.

Comments by Fed Gov. Christopher Waller who spoke at the National Press Club today addressed the Federal Reserve’s inflation target created in 2012 saying, “We have reaffirmed this numerical goal repeatedly since 2012, and, in tightening monetary policy since early last year, we’ve made clear that we’re determined to bring inflation down to 2%,” He added that this inflation level is  “most consistent” with the central bank’s dual mandate of stable prices and maximum employment.

As reported in Barron’s, “James Bullard, now the dean of the business school at Purdue University, highlighted how the 2% target came about as the result of intense calculations and arguments. It is now the international standard for price growth.”

Government officials as well as Federal Reserve members are extremely cautious about any policy changes as the Israeli-Hamas war has magnified the global geopolitical uncertainty.

On Saturday Hamas, a militant group also known as the Islamic Resistance Movement initiated a surprise and coordinated attack on Israel by launching rockets at multiple cities. Hamas said it struck the Israeli cities of Jerusalem, Tel Aviv, Sderot, Ashkelon, and Ashdod with over 2,000 rockets.

According to many analysts, this conflict is far from over. The struggle for the Gaza strip is just unfolding and will have major ripples and implications throughout the financial markets. Most assuredly this war will continue to have a profound impact on both crude oil and gold prices causing both to escalate in conjunction with the tensions in Gaza.

Wishing you as always good trading,