Gold prices reached a one-month high on Wednesday as concerns over a deadly explosion in Gaza intensified fears of an escalating regional conflict, making the precious metal a preferred choice for investors seeking safety against war-related risks.
Spot gold exhibited an 0.8% increase, reaching $1,938.19 per ounce by 0501 GMT, marking its highest level since September 20 earlier in the trading session. Simultaneously, U.S. gold futures saw a similar 0.8% surge, settling at $1,950.90.
Kelvin Wong, Senior Market Analyst for Asia Pacific at OANDA, pointed out that gold’s recent rally is a result of a combination of factors. These include geopolitical risk premiums associated with concerns over a prolonged conflict, the momentum gained after breaking key technical thresholds, and fears of stagflation due to soaring oil prices.
The blast at a Gaza City hospital on Tuesday, which resulted in hundreds of casualties, ignited protests not only in the West Bank but also across the Middle East. This has only exacerbated the safe-haven appeal of gold amid escalating geopolitical tensions in the region.
Yeap Jun Rong, an IG market strategist, commented, “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.”
Despite robust U.S. economic data suggesting the possibility of higher interest rates in the future, gold prices have surged by approximately $100 since the onset of the conflict. Typically, the expectation of higher interest rates would weigh on non-yielding gold. However, the ongoing geopolitical concerns have offset this impact.
Investors are now eagerly awaiting Federal Reserve Chair Jerome Powell’s speech scheduled for Thursday, as it is expected to provide valuable insights into the central bank’s stance on interest rates.
OCBC 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.”
Gold’s positive momentum was further boosted by data indicating that China’s economy, the world’s top consumer, grew at a faster-than-expected rate in the third quarter compared to the previous year.
In the broader precious metals market, spot silver saw a 1.2% increase, settling at $23.09, while platinum rose 0.4% to $900.32, and palladium gained 0.2% to $1,145.60.
