Gold Rises Above 2,060 Due to Rising Geopolitical Tensions
XAU/USD wasn't trading yesterday as Western markets, including NYMEX, were closed due to Christmas.
Earlier today, the price of gold (XAU) rose sharply due to renewed geopolitical tensions in the Middle East. Following a drone attack by Iran-aligned militants that injured three U.S. troops, the U.S. military responded with precise airstrikes in Iraq. Furthermore, Israeli Prime Minister Benjamin Netanyahu has committed to extending the Gaza operation, declaring that the war 'isn't close to finished' and is expected to be prolonged, as reported by AP News and Reuters. Netanyahu, addressing rumours in the media, stated that the Israeli government has no plans to cease military actions against Hamas in Gaza.
On Tuesday, financial markets in Australia, New Zealand, Hong Kong, the U.K., and the eurozone will remain closed during the Boxing Day public holiday. Thus, trading activity in metals, including gold, will likely remain quiet. 'Spot gold may retest support of 2,053 USD per ounce as it faces strong resistance of 2,073 USD,' said Reuters analyst Wang Tao.
GBP/USD Fails to Hold Above 1.27000 on Mixed Rates Outlook
The British pound (GBP) was essentially unchanged on Monday as market activity stopped due to the Christmas holiday.
GBP/USD has been trading sideways for the last month, fluctuating between 1.25000 and 1.28000 as traders received mixed signals. The British pound is strengthened due to the growing possibility of rate cuts by the Federal Reserve (Fed). Indeed, investors currently price in a near 90% probability of a 25-basis-point (bps) cut in the U.S. base rate in March and less than a 50% chance of a similar rate cut in the U.K. However, the market doesn't consider the Bank of England (BOE) hawkish anymore. Long-term prospects for the U.K. interest rate are similar to the U.S. rates: swaps market data indicates that traders expect to see 140 bps worth of rate cuts in the U.K. by the end of December 2024.
GBP/USD was falling slightly during the Asian and early European session. On Tuesday, exchanges in Australia, New Zealand, Hong Kong, the U.K., and the eurozone will remain closed due to the Boxing Day public holiday. Thus, the trading activity in the metals market will likely remain quiet. Volatility is expected to increase on Wednesday and Thursday when several important macroeconomic reports come out.