Gold hitting new multi-month highs on Middle East conflicts

GOLD MARKET – Spot gold saw a 0.4% increase, reaching $1,980.80 per ounce by 1143 GMT, marking its highest point since July 20. Concurrently, U.S. gold futures also experienced a 0.6% upturn, reaching $1,992.50.

Craig Erlam, a senior markets analyst at OANDA, explained, “There’s a considerable amount of uncertainty regarding Israel and Gaza at the moment, and given the current circumstances, even two days can feel like a substantial period of time. This situation has triggered a shift towards safe-haven investments and risk aversion as the weekend approaches. I believe this reaction is expected by many.”

On Friday, Israel carried out a significant operation in a northern Gaza district and issued orders for the evacuation of the largest Israeli town near the Lebanese border. These actions indicated an impending command to invade Gaza.

Gold has observed a 2.5% surge this week and has gained nearly $150 since the commencement of the conflict.

Fitch Solutions noted that gold was also being bolstered, “as concerns of another Federal Reserve rate hike in 2023 diminish,” and projected that prices would average $1,950 per ounce for the year.

Federal Reserve Chair Jerome Powell, on Thursday, expressed his preliminary agreement that the rising bond yields were contributing to a further tightening of financial conditions and might slightly diminish the need for additional rate increases. This is important because higher interest rates increase the opportunity cost of holding gold.

According to the CME FedWatch tool, the general consensus in the market is that the Federal Reserve will maintain interest rates at their current levels in its upcoming policy meeting next month.

Anticipations suggest that spot gold will continue its upward trajectory within the range of $1,998 to $2,010 per ounce, following its successful breakthrough of the resistance at $1,972.

In tandem, spot silver experienced a 0.4% gain, reaching $23.13 per ounce, while platinum witnessed an increase of 0.8%, reaching $897.45. Both of these precious metals were heading for their second consecutive weekly rise.

In contrast, palladium faced a 0.7% decline, falling to $1,106.21, marking its fourth consecutive weekly drop.

Dan Barrett is the Chairman of Pacific Precious Metals and the Founder of the Aureus Point-of-Sale system, a software platform made for bullion and coin dealers. He has been investing in physical gold and silver for over 15 years. His prior experience includes being an Analyst for a variety of Banks and Hedge Funds.