Image Source: Pixabay
 

Gold price (XAU/USD) jumps to around $5,005 during the early Asian session on Thursday. The precious metal rebounds following a period of intense volatility. Traders weigh the next round of US economic signals and the broader demand for safe-haven assets.

The rally of the yellow metal is bolstered by a safe-haven demand after the US military shot down an Iranian drone that "aggressively" approached the USS Abraham Lincoln aircraft carrier in the Arabian Sea, sparking fears of US-Iran escalation. Iranian and US officials confirmed on Wednesday that talks between their countries would be held in Oman on Friday. Traders will closely monitor the developments surrounding the negotiation. 

Analysts believe the volatility of precious metals will persist after the price plunge. “We will maintain higher volatility environments than we had historically, but not what we’ve had over the last few days unless we run up another spec bubble,” said Niklas Westermark, head of EMEA commodities trading at BofA.

Nonetheless, a Federal Reserve (Fed) leadership shift might cap the upside for Gold. Markets anticipated a more hawkish and independent Fed under Warsh. Traders dialed back expectations for a Fed rate cut following the Fed's January pause and the nomination of Warsh. Financial markets currently priced in nearly a 46% odds of a rate reduction at the June policy meeting, according to the CME FedWatch tool.

More By This Author: