Geopolitical tensions jumped again this week as unrest grew in Iran, the war in Ukraine dragged on, and the U.S. moved to detain Venezuela’s Nicolás Maduro. Washington even revived talk about taking control of Greenland. In an interview with Fox News, President Trump also said he’s considering military strikes on drug cartels in Mexico.
Those comments come on top of recent threats of action in Cuba and Colombia, which have raised concerns on both sides of the aisle in Congress. On Thursday, the Senate took its first step toward blocking any further military moves in Venezuela, with five Republicans joining Democrats to back a War Powers Resolution.
For traders, this mix of uncertainty tends to push investors toward safer assets. If tensions escalate further, gold could easily see more demand as traders look for a hedge against geopolitical risk.
Treasury Yields and Dollar Impact Gold Sentiment
A muted response by Treasury traders could also be underpinning demand for gold, while a stronger dollar may be weighing on demand. U.S. Treasury yields were little changed mid-morning on Friday after the latest jobs report showed a mixed picture of the U.S. labor market.
Mixed Jobs Data Keeps Fed Rate Cut Hopes Alive
The December nonfarm payrolls report showed a stable, yet softening, labor market that may still lead the Federal Reserve to cut interest rates, perhaps as early as March. Traders don’t expect the Fed to cut rates at its January meeting.
The U.S. economy added 50,000 new jobs last month, weaker than expected, but the unemployment rate dipped to 4.4%. Economists polled by Dow Jones had expected 73,000 new jobs last month, and the unemployment rate to have dropped to 4.5%, CNBC reported.