Spot Gold surges on Middle East tensions, FOMC meeting eyed

Spot Gold surged on Monday, underpinned as a safe haven by mounting worries over situation in the Middle East.

Geopolitical risks heightened after 3 US service members were reportedly killed in an unmanned aerial drone strike on US forces located in northeastern Jordan.

Risk aversion was also bolstered after a court order to liquidate property giant China Evergrande Group.

Still, Gold’s upside may be limited, as the Federal Reserve’s January 30th-31st policy meeting looms. The Fed is largely expected to keep interest rates on hold, while investor attention will firmly be on Fed Chair Jerome Powell’s remarks for hints regarding rate outlook.

Markets are expecting five 25 basis point rate cuts from the Fed this year, according to LSEG’s IRPR app.

Lower interest rates reduce the opportunity cost of holding Gold.

As of 8:16 GMT on Monday Spot Gold was gaining 0.68% to trade at $2,032.36 per troy ounce.

Gold Futures for delivery in April were advancing 0.70% on the day to trade at $2,050.35 per troy ounce.

Elsewhere, Silver Futures for delivery in March were up 1.14% to trade at $23.133 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching up 0.04% to 103.515 on Monday.