Gold prices soared by more than 1% on Monday in response to heightened tensions between Israeli and Hamas forces, raising concerns about a potential wider conflict in the Middle East. These geopolitical concerns prompted investors to seek safe-haven assets like gold.
The recent escalation began when Israel retaliated against one of the deadliest attacks in its history, launched by the Islamist group Hamas on Israeli towns over the weekend. Israel’s military actions in Gaza resulted in hundreds of casualties.
As a result, spot gold prices surged by 1% to reach $1,849.90 per ounce, marking the highest level in a week. Meanwhile, U.S. gold futures climbed by 1.1% to $1,864.50.
According to Matt Simpson, Senior Analyst at City Index, gold has regained its status as a safe-haven asset due to the weekend’s geopolitical events. He also suggested the potential for gold to reach $1,880 in this context. However, Simpson expressed doubt about gold breaking the $1,900 threshold without a significant drop in bond yields.
The escalating violence in the Middle East has raised concerns about the possibility of a major new war in the region. This has led to higher oil prices and increased demand for safe-haven assets like U.S. Treasuries, the U.S. dollar, the Japanese yen, and gold.
Despite its recent rebound from seven-month lows, gold’s upward potential remains limited by robust U.S. economic data. Positive data indicates that the Federal Reserve is unlikely to halt its monetary policy tightening cycle in the near future. Last week, strong employment data and the prospect of another U.S. interest rate hike this year contributed to this view.
Higher U.S. interest rates make holding gold less appealing as it yields no interest. Investors are now awaiting the release of the minutes from the U.S. central bank’s September meeting, scheduled for Wednesday.
In addition to gold, other metals experienced mixed movements, with spot silver rising by 0.3% to $21.66 per ounce, platinum advancing by 0.6% to $881.91, and palladium declining by 0.4% to $1,152.96.
