Gold up on safe haven appeal as Israel retaliates after surprise Hamas attacks
The price of gold surged by 1% to reach $1,860 per ounce on Monday, extending gains from the previous session amid the ongoing war between Israel and the Palestinian militant group Hamas, which entered its third day and heightened geopolitical tensions in the Middle East.
Over the weekend, Hamas launched a surprise attack on Israel, triggering a series of retaliatory actions from the latter and resulting in a combined death toll exceeding 1,000 on both sides. On Sunday, Israel declared a formal state of war for the first time since 1973, setting the stage for a major military operation in the Gaza Strip.
Investors were also concerned about the potential for a broader conflict, with suspicions of Iranian involvement in the attacks. According to both Hamas and Hezbollah, Iran helped plan the attack, according to a report in The Wall Street Journal. However, according to a Monday report from the Times of Israel, “the IDF also said there was no evidence yet of Iran’s role.”
Despite a stronger-than-expected U.S. jobs report on Friday, gold managed to mount a solid comeback and rise by 0.7% as the dollar retreated on the day after showing short-lived gains.
Gold price forecast: Boost may be temporary as markets sensitive to news of wider conflict
As the metal is viewed as a safe-haven asset by some investors during periods of geopolitical turmoil, the short-term gold price dynamics will likely be positive, as noted by Norbert Ruecker, head economics and next generation research at Julius Baer, told the Wall Street Journal:
“Oil and gold prices are gaining on the uncertainty; safe-haven government bonds could see a pause in rate increases amidst the return in safe-haven flow.”
According to Ruecker, the key question is how long these haven flows will last with the conflict escalating:
“At least from a commodity perspective, geopolitics tends to be a noise element rather than a lasting and impactful fundamental force.”
Peter Schaffrik, chief European macro strategist at RBC Capital Markets, issued a similar gold price overview, saying that for a broader or lasting impact on markets — including commodities such as gold — the conflict would likely need to escalate beyond Israel's borders:
"The uncertainty about what [the war] means for the region means that oil is going up, and there is a bit of ‘risk off’ and hence bond markets are performing and equity markets are down a little bit. You can’t help but feel sympathy for the people on the ground, but the market, if it doesn’t impact the wider economy, can easily shrug things off."
A recent survey by Kitco indicated that Wall Street analysts and retail investors were evenly split on gold’s prospects — although those projections and opinions will now likely be adjusted given the Hamas attack on October 7.
The gold price forecast shared by economic data aggregator TradingEconomics saw the commodity trading at a potential average of $1,853.05 by the end of this quarter. The platform’s 12-month gold projection estimated it to trade at $1,916.63 by early October 2024, indicating a potentially bullish outlook.
When considering gold and other commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
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