As investors exercise caution ahead of Israel's retaliation to Iran's attack, the price of gold is hovering near record highs.
The war cabinet's third meeting in Israel was rescheduled for Wednesday instead of Tuesday.
Given that Fed Chair Powell stressed that hitting the 2% inflation objective will take longer than anticipated, there may be obstacles to gold demand.
Wednesday's gold price remains steady at $2,380 per troy ounce, not far from record highs as traders remain cautious in advance of Israel's retaliation to Iran's airstrike on Saturday. According to a Reuters story, Israel's war council decided to delay its third meeting until Wednesday in order to decide how to respond to Iran's unprecedented direct attack. The meeting was originally set for Tuesday.
Moreover, The Jerusalem Post revealed that sources had revealed that Israel had reportedly completed preparations for a counterattack against Iran. Late on Tuesday, US National Security Advisor Jake Sullivan declared that new sanctions on Iran will be implemented in the next few days, along with further penalties against organizations that provide support to the Islamic Revolutionary Guard Corps and Iran's Defense Ministry.
In the meantime, Jerome Powell, the chairman of the Federal Reserve (Fed), moderated expectations for rate reduction on Tuesday at the Wilson Center in Washington. Powell pointed out that the US economy has demonstrated notable strength and that current data suggests that this year's inflation has not significantly improved. He underlined that it will take "longer than expected" to reach the 2% inflation objective. The appeal of non-yielding assets, like gold, usually decreases with the possibility of increased interest rates.
The chance that interest rates will stay the same at the June meeting has increased from 78.7% on Monday to 84.8%, per the CME FedWatch Tool. For more clues about the course of monetary policy, investors will be closely watching this week's talks by Federal Reserve officials as well as Thursday's US Initial Jobless Claims report.
