Gold Prices Surge Amid Conflict in Israel and Palestine
Gold prices experienced a significant surge on Monday as tensions escalated between Israel and Palestine. The conflict prompted investors to turn to gold, a safe haven asset, driving up its value. Spot gold (XAU) rose by 1% to settle at $1,847.47 per ounce.
The increase in gold prices was not limited to spot gold alone. US gold futures also enjoyed a 1% jump, reaching $1,863.40 on Monday.
Within the domestic market, spot prices for 24 carat gold saw a substantial increase of Rs 220, resulting in a price of Rs 58,200 per 10 grams. Similarly, MCX Gold December futures surged by Rs 494 to Rs 57,365 per 10 grams.
This surge in gold prices marked a significant rebound from the seven-month low it experienced last Friday at $1,832.26 per ounce.
Gold had been facing pressure from higher interest rates and a stronger-than-expected job report in the US, which signaled the possibility of more aggressive Federal Reserve rate cycles. However, the recent geopolitical risks in the Middle-East, particularly the potential for further escalation into a war, have provided a short-term boost to gold.
Kotak Securities highlights that while headwinds persist due to higher rates in the short term, the upcoming US consumer inflation data will be closely watched. This data may shed light on the duration of higher interest rates.
The escalation of geopolitical concerns raises the risk premium for gold, which is considered a safe haven in times of turmoil. The tensions in the Middle-East intensified following the Hamas attack on Israel, with alleged Iranian involvement raising fears of a regional conflict. However, the impact of this conflict on gold prices might be minimal if it remains limited to Israel and Palestine.
Overall, the surge in gold prices amid the conflict in Israel and Palestine reflects investors’ desire for a safe haven asset during periods of uncertainty. The geopolitical tensions in the Middle-East have proven to be a catalyst for gold, offsetting the pressure from higher interest rates and a strong US job report. The upcoming US consumer inflation data will provide further insights into the direction of interest rates.
