In response to mounting concerns over an escalating regional conflict following a tragic incident in Gaza, gold prices reached a one-month high on Wednesday, firmly establishing itself as a safe-haven asset of choice in times of geopolitical uncertainty.
The surge saw spot gold rise by 0.8% to reach $1,938.19 per ounce by 0501 GMT, marking its highest level since September 20 earlier in the trading session. Concurrently, U.S. gold futures also climbed by 0.8% to $1,950.90.
Kelvin Wong, senior market analyst for Asia Pacific at OANDA, attributed the precious metal’s impressive performance to a confluence of factors. These include the mounting geopolitical risk premium stemming from fears of a protracted conflict, the momentum generated after breaching critical technical thresholds, and the specter of stagflation, a consequence of soaring oil prices.
Tuesday’s tragic explosion at a Gaza City hospital, resulting in a significant loss of life, triggered widespread protests across the Middle East and the West Bank. In light of these developments, gold has continued to serve as a steadfast safe-haven, shielding investors against the ever-increasing war-related risks.
IG market strategist, Yeap Jun Rong, stated, “Safe-haven flows amid geopolitical tensions in the Middle East have remained the dominant catalyst for gold prices. The risks of further escalation in the conflict may be supportive of prices for now, but the $1,945 level may prove to be a crucial resistance to overcome.”
Remarkably, gold prices have surged by approximately $100 since the commencement of the conflict, a trend that has persisted despite robust U.S. economic data that has heightened expectations of enduring higher interest rates—an element that traditionally exerts downward pressure on non-yielding gold.
As the investment community eagerly anticipates Federal Reserve Chair Jerome Powell’s speech scheduled for Thursday, the event is poised to serve as a pivotal source of guidance on the future of interest rates.
OCBC aptly noted, “The higher-for-longer (rates) narrative that has pinned down gold over the last couple of weeks appears to see tentative signs of fading as markets look to refreshed comments from Fed officials.”
In further positive developments for the precious metals market, data revealed that China, the world’s foremost consumer of gold, experienced faster-than-anticipated economic growth in the third quarter, compared to the previous year.
Spot silver surged by 1.2% to $23.09, while platinum recorded a 0.4% increase, settling at $900.32, and palladium advanced by 0.2% to reach $1,145.60.
