Gold prices surged to a nearly one-month high on Wednesday, driven by growing concerns about the Middle East conflict escalating, rendering the precious metal an attractive investment choice due to its safe-haven status.
As of 0700 GMT, spot gold saw a 0.7 percent increase, reaching $1,935.63 per ounce. Earlier during the session, it reached its highest point since September 20. Meanwhile, US gold futures also rose by 0.7 percent, reaching $1,948.40.
Gold's upward trajectory can be attributed to a combination of factors, including geopolitical risk premiums prompted by apprehensions of a prolonged conflict, momentum from breaking through crucial technical levels, and concerns of stagflation due to elevated oil prices. This assessment was provided by Kelvin Wong, the Senior Market Analyst for Asia Pacific at OANDA.
A tragic incident occurred on Tuesday, where a fatal explosion took place in a Gaza City hospital, leading to significant loss of life, as reported by Palestinian authorities. This event led to protests in various regions, including the West Bank and across the Middle East.
IG Market Strategist Yeap Jun Rong observed that "safe-haven flows amid geopolitical tensions in the Middle East have remained the dominant catalyst for gold prices." He also mentioned that while the risk of further escalation could provide temporary support to gold prices, breaking through the $1,945 level could prove to be a crucial challenge.
Remarkably, gold prices have surged by approximately $100 since the onset of the conflict. This increase has occurred despite recent robust economic data from the United States, which had fueled expectations of higher interest rates. Such expectations usually exert downward pressure on non-yielding assets such as gold.
Investors are now awaiting Federal Reserve Chair Jerome Powell's upcoming speech on Thursday to glean insights into the central bank's stance on interest rates.
Furthermore, OCBC noted in its monthly commodities outlook that the narrative of "higher-for-longer rates" which had restrained gold prices over the past few weeks seems to be showing early signs of dissipating. It pointed out that markets are anticipating fresh comments from Federal Reserve officials.
Beyond the boost to gold prices, positive news regarding China's economy provided additional support. The data indicated that China, a leading consumer of gold, experienced growth during the third quarter that surpassed expectations from a year earlier.
In the precious metals market, spot silver saw a 0.9 percent increase, reaching $23.02, platinum rose by 0.3 percent to $900.15, and palladium recorded a minor 0.2 percent dip, ending at $1,141.04.
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