Gold prices reached a one-week high on Monday due to escalating conflict between Israel and Hamas, causing political unrest in the Middle East and increasing demand for safe-haven assets. Spot gold rose nearly 1% to $1,848.15 per ounce, its highest level since September 29. The S&P 500 and Nasdaq indices declined in response, while crude oil prices surged over 3%. Traders are pricing in a 28% chance of another rate hike by the Federal Reserve later this year
On Monday, gold prices surged to a one-week high due to escalating military conflict between Israeli forces and the Palestinian Islamist group Hamas, causing political unrest in the Middle East and driving up demand for safe-haven assets.
Israeli troops were engaged in a battle on Monday, attempting to clear out Hamas gunmen who had crossed the Gaza fence more than two days earlier, resulting in a deadly rampage.
The price of spot gold increased by nearly 1%, reaching $1,848.15 per ounce by 10:21 a.m. EDT (14:21 GMT), marking its highest level since September 29. This rise came after gold prices touched a seven-month low on Friday following a surge in U.S. Treasury yields.
U.S. gold futures also saw a 0.9% climb, reaching $1,862.10.
Bob Haberkorn, senior market strategist at RJO Futures, stated, "There are many uncertainties regarding the future developments in the Middle East. If the situation continues to escalate, gold prices could potentially reach $1,900." Gold is often considered a secure store of value during times of political and economic instability.
In response to the Middle East violence, the S&P 500 and Nasdaq indices experienced declines, while crude oil prices surged by over 3%.
Additionally, market attention was focused on the release of minutes from the Federal Reserve's most recent monetary policy meeting and forthcoming U.S. inflation data later in the week.
Ole Hansen, head of commodity strategy at Saxo Bank, expressed his view, saying, "We do not anticipate the FOMC to raise rates amid increased uncertainty, and the possibility of peak rates is now closer, despite the potential inflationary impact of higher oil prices."
Traders are currently pricing in a roughly 28% chance of another rate hike by the Federal Reserve later this year, according to the CME Fedwatch tool. Higher interest rates can increase the opportunity cost of holding gold.
In the realm of other precious metals, spot silver saw a 0.5% increase, reaching $21.70 per ounce. Platinum experienced a 0.2% rise, reaching $878.58, while palladium declined by 2.2% to $1,132.12.
Heraeus analysts noted, "The demand for platinum in fuel cell vehicles is expected to offset some of the lost demand resulting from decreased autocatalyst demand."
