Gold Strengthens Amid Fed Rate Cut Speculation and Middle East Tensions

Gold prices strengthened to $2,437.19 per Troy Ounce compared to the previous week due to the increased speculation of a Fed rate cut in September as well as the escalation of geopolitical tensions between Israel and other countries in the Middle East region.

From the final results of The Fed's policy meeting at the end of July, interest rates were maintained in the range of 5.25%-5.50%. Even so, the potential for easing policy related to interest rates can be done in accordance with the statement of the Chairman of the Board of Governors of The Fed, Jerome Powell, which states that interest rates can be cut if the US economy follows the expected target and is accompanied by strong enough economic growth and a consistent labor market. The increase in gold prices is also supported by some recently released US economic data. In the midst of a presidential election, US sovereign debt has approached the US$35 trillion. Rising deficits and large US sovereign debt will certainly pose a risk of US political instability. These conditions pose a threat to the US Dollar's performance in the future.

Meanwhile, two major events took place on Wednesday, July 31, 2024, which are the assassination of Hamas leader, Ismael Haniyeh, due to an attack in Iran and an Israeli attack on Beirut's southern suburbs that killed a senior Hezbollah commander. The attack on Iran was part of an Israeli operation aimed at combating Hamas militants. Meanwhile, the attack on Lebanon was carried out in response to an earlier Hezbollah rocket attack that killed 12 teenagers and children at a soccer field in Israel. These conditions could certainly trigger further concerns that war will spread in the Middle East region. Therefore, these geopolitical tensions in the Middle Eastern have an impact on the market, which can generate positive sentiment that can increase demand for gold, thus driving demand for gold as a safe haven asset.

Market View

Concerns That US May Be Heading For Recession

The US economy is seen as potentially experiencing an unexpected setback in July following weak expectations for some of the economic data to be released. Labor hiring in the US is predicted to fall and the unemployment rate is predicted to remain unchanged. Expectations for non-farm employment change data indicate a potential decline in the number of private non-agricultural labor hiring by 30,000 jobs from the previous period, which amounted to 206,000 jobs. In addition, the unemployment rate is predicted to remain at 4.1%.

Rising Geopolitical Tensions In The Middle East Region

The assassination of Hamas leaders by Israeli attacks could trigger threats of revenge and increase geopolitical tensions in the Middle East region. Recent sources says that top Iranian officials will meet with representatives of their regional allies from Lebanon, Iraq, and Yemen to discuss a potential retaliatory strike against Israel. This has sparked further concerns about the spread of war in the Middle East region.

WEEKLY ECONOMIC DATA & EVENTS CALENDAR

Date	Data/Events	Actual	Ekspektasi	Sebelumnya
29-Jul	US - Dallas Fed Manufacturing Index	-17.5	-	-15.1
30-Jul	US - CB Consumer Confidence	100.3	99.7	97.8
30-Jul	US - JOLTS Job Openings	8.18M	8.02M	8.23M
31-Jul	US - ADP Non-Farm Employment Change	122K	147K	155K
31-Jul	US - Employment Cost Index q/q	0.9%	1.0%	1.2%
31-Jul	US - Pending Home Sales m/m	4.8%	1.4%	-1.9%
1-Aug	US - Federal Funds Rate	5.50%	5.50%	5.50%
1-Aug	US - FOMC Statement	-	-	-
1-Aug	US - FOMC Press Conference	-	-	-
1-Aug	All - OPEC-JMMC Meetings	-	-	-
1-Aug	US - Unemployment Claims	249K	236K	235K
1-Aug	US - Final Manufacturing PMI	49.6	49.5	49.5
1-Aug	US - ISM Manufacturing PMI	46.8	48.8	48.5
1-Aug	US - ISM Manufacturing Prices	52.9	51.9	52.1
2-Aug	US - Average Hourly Earnings m/m	0.2%	0.3%	0.3%
2-Aug	US - Non-Farm Employment Change	114K	176K	179K
2-Aug	US - Unemployment Rate	4.3%	4.1%	4.1%

Source: ICDX Research