Gold prices surged to more than a one-week high on Tuesday, building on significant gains from the previous day. Heightened market uncertainty due to the ongoing Middle East conflict, coupled with dovish statements from prominent U.S. Federal Reserve officials, exerted downward pressure on the dollar and bond yields, boosting the appeal of the precious metal.
Market Fundamentals:
Spot gold rose by 0.2% to reach $1,864.39 per ounce as of 0117 GMT, hitting its highest level since September 29. Meanwhile, U.S. gold futures climbed 0.8% to $1,878.20.
On Monday, gold prices recorded a notable 1.6% increase, marking the most significant one-day jump in five months. The surge was fueled by escalating military clashes between Israel and the Palestinian Islamist group Hamas, which heightened concerns of a broader conflict affecting oil supplies in the Middle East. This, in turn, bolstered demand for safe-haven assets, with gold being a primary beneficiary.
The ongoing Middle East conflict has introduced additional volatility into the market, compounding uncertainty ahead of corporate earnings season and the release of crucial U.S. inflation data later in the week.
Benchmark 10-year Treasuries experienced their most substantial rally in over a month during the opening session in Tokyo.
The U.S. dollar index retreated as top Federal Reserve officials indicated on Monday that the rising yields on long-term U.S. Treasury bonds could dissuade the Fed from implementing further increases in its short-term policy rate.
Remarks by Fed Vice Chair Philip Jefferson and Dallas Fed President Lorie Logan led investors to reduce expectations of additional Fed rate hikes.
Gold, traditionally viewed as a safe-haven investment during periods of economic uncertainty, tends to lose its appeal when interest rates rise due to its lack of interest-bearing returns.
The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reported a 0.5% decrease in holdings to 861.81 metric tons on Monday.
Other Metals:
In addition to gold, other metals experienced gains: spot silver increased by 0.2% to $21.94 per ounce, platinum rose by 0.4% to $889.53, and palladium climbed by 1.3% to $1,154.34.
Gold’s ascent appears to be a response to the confluence of geopolitical tensions and dovish signals from the Federal Reserve, factors that are contributing to increased market uncertainty and driving demand for safe-haven assets.
