The dollar resumed its decline, and geopolitical tensions lifted gold prices

On Thursday (September 19), spot gold surged by more than 1%, at one point approaching $2,595/ounce. Analysts pointed out that the dollar resumed its decline after the Federal Reserve's decision, coupled with geopolitical tensions, gold prices were boosted. Heavyweight news came from the ceasefire talks in the Middle East. The latest report from the Wall Street Journal said that US officials admitted that Biden could not achieve a ceasefire in Gaza.

Spot gold closed up $27.31, or 1.07%, at $2586.49 an ounce on Thursday; gold prices hit a high of $2594.90 an ounce.

foreign exchange trading platformAnalyst Christian Borjon Valencia pointed out that gold prices rose on Thursday after the Federal Reserve announced a 50 basis point interest rate cut and entered an easing cycle. Traders ignored the rise in U.S. Treasury yields, and gold prices are still moving towards $2,600 an ounce.

The dollar index closed 0.3% lower at 100.64 on Thursday; the dollar index touched 101.45 in early Asian trading on Thursday.The Federal Reserve cut its benchmark policy rate by 50 basis points to 4.75-5.00 per cent on Wednesday. The Fed expects the base rate to fall by another 50 basis points by the end of this year, a full 100 basis points next year and another 50 basis points in 2026.

(One-hour chart of the US dollar index)

Alex Ebkarian, chief operating officer of Allegiance Gold, said: "The market is looking at bigger and more rate cuts because we are in fiscal and trade deficits and that would further weaken the overall value of the dollar."

UBS believes that gold prices can rise further and expects to target $2,700 an ounce by mid-2025."Driven by near-term risk factors, we expect gold ETF demand to accelerate in the coming months," UBS said.

"If you combine geopolitical risk with our current deficits, low-yield environment and dollar weakness, the combination of all these factors will lead to higher gold prices," said Mr. Ebkarian.

In times of political and economic uncertainty, gold is seen as a safe haven, and because it does not generate interest, it often thrives in low-interest-rate environments.

The Wall Street Journal released an exclusive report on Thursday, saying that for months, senior US officials have said that a ceasefire and hostage release agreement are close at hand, but now they privately admit that they do not expect Israel and Hamas to reach an agreement before the end of Biden's presidential term.

The report pointed out that the Biden administration will not stop seeking a deal, considering it the only way to end the Gaza war and stop the rapidly escalating conflict between Israel and Hezbollah in Lebanon.

The White House had previously said that the warring sides had agreed to "90 per cent" of the text of the agreement and therefore remained hopeful of a breakthrough, but senior White House, State Department and Pentagon officials do not believe the warring sides will agree to the current framework.