Gold Dips, But Israel Just Hit Yemen

The gold price had a large dip with most other markets before closing. Its price has not yet reacted to Israel bombing Yemen last night.

Gold futures finally experienced a sharp drop on Friday. The 2% drop was the first weekly loss in a month. This pullback comes after the metal's surge to record highs (in USD) earlier in the week. This could simply be a natural correction in what seemed to be its recent "up only" price movement.

The simultaneous drop in gold, bonds, and stock prices suggests a temporary retreat in anticipation of Federal Reserve rate cuts. This comes despite Federal Reserve Board Governor Christopher Waller reassuring markets not to expect one at their next meeting.

Some analysts note that the fall seemed to have begun in China. China is the world's largest consumer of gold and analysts have stated that a global recession could slow demand from retail customers. This theory assumes that Chinese citizens would not fight their fears of instability by liquidating other investments and buying even more gold. This has happened in the past so what would change this time?

Another theory is that there has been general fear and uncertainty in the air and almost everything fell before markets closed. Gold has also been overdue for a retracement. In typical risk-off and deleveraging fashion, the USD gained strength and jumped back over a major resistance level. The CrowdStrike outage dented the already waning confidence in the tech sector's strength.

Gold reached an intraday record high of $2,488.40 on Wednesday. Over the past three weeks, gold and other assets rose as investors anticipated a Federal Reserve pivot to rate cuts as early as September. However, as this theme lost momentum, gold did not decline as sharply as other markets.

Despite the recent pullback, gold's failure to maintain its upward momentum has led speculators to test the key $2,400 support line. Last week's excitement included Federal Reserve Chairman Jerome Powell's comments on beating inflation and former President Trump's advocacy for a cheap dollar policy, which influenced market movements.

Israel Strikes Yemen

Israeli fighter jets have just bombed a Houthi stronghold. This was retaliation for a drone attack hitting an apartment in Tel Aviv. This is yet another development in the ongoing conflict that seems to be going from bad, to worse. The strike has resulted in Houthis stating that they will answer escalation with escalation. The only issue is that this is also the Israeli stance. It is not guaranteed, but historically these escalations have led to a rise in the price of gold.