Gold prices on the global market surged by more than 1 per cent as the conflict between Israel and the Palestinian terrorist group Hamas escalated following an unprovoked offensive by the latter.
Heightened tensions in the Middle East have triggered a rush among investors towards safe-haven assets, with gold leading the way.
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In response to one of the most devastating attacks in its history, Israel initiated a retaliatory offensive in the Gaza Strip, resulting in substantial loss of life. The situation has since escalated, stoking concerns of a potentially broader conflict in the region.
Spot gold prices experienced a remarkable 1.2 per cent surge, reaching $1,853.79 per ounce, marking its highest level in a week. Simultaneously, U.S. gold futures followed suit, climbing by 1.2 per cent to reach $1,867.80.
City Index’s Senior Analyst, Matt Simpson, told news agency Reuters that this uptick in gold prices is directly attributable to its reestablished status as a safe-haven asset in light of recent geopolitical developments.
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Simpson expressed optimism, stating, “We see the potential for gold to reach $1,880, but breaking the $1,900 barrier may be contingent on a more substantial drop in bond yields.”
Factors driving gold rally
The escalating violence in the Middle East has sparked concerns about the potential outbreak of a significant new conflict. This, in turn, has driven up oil prices and triggered a heightened demand for safe-haven assets such as US Treasuries, the US dollar, the Japanese yen, and notably, gold.
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Gold’s remarkable rebound from its seven-month lows, reached just on Friday, underscores its enduring appeal as a safe-haven asset during times of uncertainty.
However, its upward trajectory has been constrained by robust US jobs data, which has bolstered the belief that the Federal Reserve is unlikely to deviate from its course of monetary policy tightening in the near future.
