Meanwhile, Silver (XAG/USD) is trading at 88.23, up 3.74%, as safe-haven demand boosts precious metals like silver. However, the rally is supported by US-Iran tensions and expectations of lower Fed rates.
Tensions Between US and Iran Push Investors Toward Gold
On the geopolitical front, tensions between the US and Iran did not show any signs of slowing down as reports of a drone incident triggered uncertainty in the markets. As a result, the demand for safe-haven assets increased, which helps gold to stay above 5,000 mark.
According to a US Central Command spokesperson, the US Navy fighter jet shot down an Iranian drone after it approached the aircraft carrier USS Abraham Lincoln in the Arabian Sea. This incident damaged hopes for the upcoming US-Iran nuclear talks and helped gold post its biggest one-day gain since November 2008.
Gold Finds Support as Dollar Weakens Amid Mixed Fed Signals
On the US front, the broad-based US dollar failed to extend its gains and turned bearish as growing expectations of lower interest rates continued to weigh on the currency. Despite President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve chair, traders continue to bet on two more Fed rate cuts this year.
Meanwhile, Fed officials offered mixed signals. Governor Stephen Miran said inflation is not a big concern and suggested the Fed could cut rates by about one percentage point this year. On the other hand, Richmond Fed President Thomas Barkin noted that inflation is still above target but should ease as the economy remains strong.
Apart from this, President Trump signed a spending bill that ended the partial government shutdown and extended funding for several federal agencies. This positive news could cap some gains in the safe-haven gold.