Gold prices hover around $5,000 per ounce due to geopolitical risks; Federal Reserve meeting minutes limit gains

Investing.com - On Thursday during Asian trading hours, gold prices remained stable after a more than 2% surge in the previous trading day, as liquidity shortages caused by the Lunar New Year holiday dampened upward momentum. Investors are also assessing ongoing geopolitical risks and mixed signals from the Federal Reserve.

As of 20:51 Eastern Time (01:51 Beijing Time), spot gold slightly declined by 0.1% to $4,971.55 per ounce. U.S. gold futures fell by 0.4% to $4,991.59.

On Wednesday, this precious metal surged 2.1%, briefly surpassing $5,000 per ounce, recovering most of the losses from earlier in the week.

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Trading volume was relatively light due to several major Asian markets being closed for holidays, amplifying short-term price fluctuations.

Geopolitical tensions remain a key driver of gold demand. Investors are focused on escalating tensions between the U.S. and Iran, including concerns over maritime security in the Strait of Hormuz and deadlocked nuclear diplomacy.

Meanwhile, progress in Russia-Ukraine peace efforts has been minimal, reinforcing broader security risks and continuing to drive safe-haven inflows into gold.

Market sentiment turned cautious on Thursday, following the release of the Federal Reserve’s latest meeting minutes, which showed policymakers divided on the outlook for interest rates.

Some officials indicated that if inflation proves sticky, further tightening may be necessary, while others acknowledged that conditions for easing policy later this year are already in place.

The prospect of prolonged high U.S. interest rates supported the dollar and U.S. Treasury yields, putting pressure on this non-yielding asset after recent gold gains.

The dollar index jumped 0.6% overnight following the release of the somewhat hawkish Fed minutes, but traded flat on Thursday.

As borrowing costs rise, gold often underperforms because higher yields increase the opportunity cost of holding this precious metal.

Investors are currently awaiting the release of the U.S. Personal Consumption Expenditures (PCE) Price Index data on Friday, which is the Fed’s preferred inflation indicator, seeking clearer signals on the policy path.

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