Gold prices (XAU/USD) have surged since the opening of the week, approaching the $4,500 level as geopolitical tensions and expectations of a US interest rate cut continue to fuel demand for the precious metal.
The US Services Purchasing Managers Index (PMI) report is due to be released today, adding to the uncertainty in the market.
At 9.30 am, gold prices were at $4,475, down 0.43% since it opened in early trading on Wednesday in the Asian session
A massive US military attack on Venezuela last weekend rocked the market when President Nicolas Maduro and his wife were reportedly arrested and taken out of the country.
However, Maduro has denied the drug and terrorism charges leveled by the US. The crisis has cemented gold's position as a short-term safe-haven asset.
Minutes from the Federal Open Market Committee (FOMC) meeting showed a majority of Federal Reserve (Fed) officials agreed to cut interest rates if inflation eased, although there was no consensus on when or how much the cut would happen.
Fed futures contracts are pricing in an 82% chance of keeping rates unchanged at the meeting on January 27-28, according to CME FedWatch. A rate cut would reduce the opportunity cost of holding non-dividend-bearing gold, supporting the precious metal.
The next focus will be the US jobs report for December, due out on Friday.
The forecast is for 55,000 jobs to be added and the unemployment rate to fall to 4.5%. The stronger-than-expected data should strengthen the US dollar, putting pressure on dollar-denominated commodity prices.
The main paradox is that geopolitical tensions and inflation concerns continue to push gold higher, while market sentiment on the Fed’s monetary policy remains mixed.
Investors should brace for high volatility when key US economic data comes out, as it will determine the direction of the dollar and gold prices in the near term.
