Gold prices fell by 0.85% after jumping by 1.16% yesterday. The price correction was driven by partial profit-taking and a rise in the US currency, which offset increased demand for safe-haven assets amid heightened tensions in the Middle East.
Yesterday, Israel's prime minister promised that Iran would pay for its missile strike on Israel, while Tehran said any retaliatory strike would cause "enormous destruction." Overall, recent events have raised fears of a larger-scale war, which has increased demand for gold, which is considered a reliable investment in times of political and financial uncertainty.
Meanwhile, the US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.11% to 101.30. Yesterday, the index rose by 0.41% and reached its highest level since September 19. A stronger dollar makes greenback-priced bullion more expensive for other currency holders.
Investors are also preparing for the publication of US data on the labor market and business activity indices in the service sector. Statements by Fed policymakers will also be in focus. Experts warned that if the new data exceeds forecasts, it may reduce the bets of aggressive Fed easing, which will put pressure on gold. According to the CME FedWatch Tool, markets see a 39.3% probability of a 0.50% rate cut at the November meeting (down from 57.4% a week earlier) and a 49.6% probability of a 0.25% rate cut in December (compared to 49.4% a week earlier), with a 0.7% rate cut expected by the end of the year.