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Gold rises amid tensions in the Middle East and falling dollar

Gold prices rose to near record highs on Wednesday as risks of conflict in the Middle East spreading to other regions led to inflows into safe-haven assets, as well as near-term support from falling U.S. dollar and Treasury yields.

Gold rose 0.3% to $2,389.38 an ounce, not far from its all-time high of $2,431.29 hit on Friday. Gold futures fell 0.1% to $2,405.10.

MGC gold futures cme 2024 04 17

"The precious metal is heavily overbought from a technical perspective... but bulls are drawing strength from general uncertainty in markets, with geopolitics overshadowing data and monetary policy expectations."

Market participants are closely monitoring developments in the Middle East, especially Israel's response to Iran's attacks, while the US and its allies plan new sanctions against Iran.

Gold has traditionally been used as a hedge against geopolitical and economic uncertainty. It's up about 16% this year and more than $500 since Oct. 7, a turning point in the Middle East conflict.

Gold remains largely uncorrelated with the US dollar and Treasury yields as part of the current trend, it may still show short-term reactions to moves in both.

Meanwhile, on the macroeconomic front, several global brokerages pushed back their expectations that the Federal Reserve will start cutting interest rates to September rather than June, following a strong batch of recent US data, including higher-than-expected inflation.

Top Fed officials, including Chairman Jerome Powell, have refused to give any guidance on when rate cuts might begin, saying instead that monetary policy needs to be tighter for longer.

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