Although traders were more inclined towards a 25 basis point cut than a 50 basis point one, soft inflation data released earlier this week fuelled increased bets that the Federal Reserve will cut interest rates in September.
In addition to boosting confidence in the US economy, better-than-expected retail sales data also subdued expectations for a larger rate cut.
However, since lower rates mean less opportunity cost when investing in non-yielding assets, gold is still expected to benefit from the prospect of lower rates.
According to a recent note from Alpine Macro, investors should consider purchasing gold because geopolitical tensions in the Middle East will likely worsen in the upcoming months.
The research firm issues a warning, stating that Iran may soon launch limited attacks on Israel, either directly or through proxies, as it feels pressured to restore deterrence.
They point out that although influences from the West, the Arab world, and Russia are currently holding back Iran, things are still unstable.
Alpine Macro posits that deterring Iran from launching a full-scale attack could be aided by Israel’s threat of disproportionate retaliation, which could target Iran’s nuclear facilities or oil infrastructure.
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