Gold prices surged on Friday, climbing back above $1,900 an ounce to reach their highest level in nearly three weeks. The rally was fueled by Israel’s order for over a million people to evacuate Gaza, which sparked a surge in safe-haven demand for the precious metal.
Conflict in the Middle East Shakes the Markets
Stephen Innes, the managing director at SPI Asset Management, highlighted the significant impact of the events in the Middle East. The conflict between Israel and Gaza has overshadowed other market concerns and discussions. Innes explained, “The conflict and its implications have captured the world’s attention and become the primary focus of media and public discourse, temporarily diverting attention from financial and economic matters.”
War Fear Prompts Investors to Turn to Gold
With Israel’s military ordering a massive evacuation in northern Gaza, anticipation of an imminent ground invasion against the ruling Hamas militant group is rising. Innes warned, “If Israel moves into Gaza with their modern-day military might, when considering the presence of hostile actors in the region and the fundamental nature of the conflict being rooted in religious differences, we could be on the cusp of something significant.” As a result, fear of war is driving investors towards gold, as they prefer not to be caught short on oil or gold over the weekend, in case multiple conflicts in the Middle East escalate.
Gold Prices Soar to New Heights
Against this backdrop, the December gold contract surged by $40.20, or 2.1%, reaching $1,923.20 an ounce on Comex. This is the highest settlement level for a most-active contract since September 25, according to FactSet data.
The surge in gold prices demonstrates the strong safe-haven demand driven by geopolitical tensions. Investors seek to protect their wealth and portfolios amidst uncertainty, with gold serving as a reliable asset during times of crisis.
The escalating conflict between Israel and Gaza has undeniably shifted the focus of the world, diverting attention from financial and economic matters. Gold prices have capitalized on this, climbing to their highest level in almost three weeks as investors turn to safe-haven assets amid the uncertainty caused by the events in the Middle East.
Crisis in the Gold Market: Geopolitical Risk Takes Charge
The gold market is abuzz with the opportunity that crises present, as experts suggest “never let a good crisis go to waste.” In recent days, gold prices have been on the rise, experiencing a brief decline on Thursday, which was the first in five trading sessions.
Earlier this month, gold futures hit a low of $1,823.50, the lowest level since March. However, following the Hamas attack on Israel that took place last Saturday, gold prices rebounded and have since gained over 4%. Declining bond yields have contributed to this upward trend, as investors have grown more confident in the possibility of the Federal Reserve’s hiking cycle coming to an end.
Contrary to popular belief, talk of gold being seen as a “safe haven” has not translated into an influx of investment in bullion-backed exchange-traded funds. In fact, most of these funds have actually experienced a decrease in size during this week. BullionVault, a platform for users to buy and sell precious metals, has also seen more net sellers since the weekend, although the margins are minimal. It appears that some investors opted to take profits in September instead.
Interestingly, despite escalating tensions in the region, the stock market continues to rise. This suggests that investors are more focused on interest-rate expectations rather than on the unsettling news from the Middle East.
In conclusion, the gold market is currently being driven by geopolitical risk, as gold and oil bulls celebrate their early victories. The recent increase in gold prices, fueled by declining bond yields and the speculation of an end to the Federal Reserve’s hiking cycle, is being observed with caution. It remains to be seen whether these trends will endure amidst ongoing regional tensions.