Gold prices stabilized to a certain extent as traders reacted to the efforts deployed by the US to contain the geopolitical tensions in the Middle East. A political deal between all parties involved could relieve the tensions and pull gold to the downside.
The concerns about a flare-up in the region have boosted the commodity during the last few days after a long decline from this year’s peak under the weight of the US monetary policy expectations and the dollar’s strength.
Over the short term, gold prices could continue to fluctuate in response to the developments in the Middle East. The uncertainty could result in more volatility and caution while the next steps in the conflict could generate significant risks and could affect risk sentiment.
The tensions could see investors favor safe-haven assets in general as they err toward the side of caution as risks continue to accumulate. As a result, a longer and more violent conflict could see gold prices surge.
At the same time, monetary policy could remain a potent force in the market as traders continue to consider its potential developments. Gold could continue to react to new economic data releases as traders reassess their expectations. Stronger-than-expected economic figures could create additional pressure on gold prices.