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Geopolitical Tensions Buoyed Bullion

GOLD

Gold is little changed in the Asia-Pac session, after closing 0.4% higher at $2027.19 on Monday.

  • Increased geopolitical tensions buoyed bullion. Vessel attacks in the Red Sea are increasing. Yemen’s Iranian-backed Houthi rebels have claimed responsibility for attacks on two ships on December 18 - the Swan Atlantic and MSC Clara - using naval drones, according to Alarabiya news.
  • The precious metal’s gain came despite Fedspeak continuing to push back against expectations for early and significant rate cuts next year.
  • Fed Mester told the FT that the market had gotten “a little bit ahead” by pencilling in early interest rate cuts, “the next phase is … about how long do we need monetary policy to remain restrictive in order to be assured that inflation is on that sustainable and timely path back to 2%”. Meanwhile, Fed Goolsbee told CNBC he was confused with the market’s reaction to the Fed’s policy update last week.
  • However, the cheapening in US Treasury benchmarks was small, with yields finishing flat to 4bps higher.

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