Gold Prices possibly Above $2,000 Mark Amid Middle East Tensions.

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The escalating conflict between Israel and Hamas has ignited a surge in gold prices as investors seek refuge in safe-haven assets. Gold experienced its most substantial gain since May, rising by as much as 1.7% in response to the intensifying tensions in the Middle East.

The attack by Gaza militants on Israel has had far-reaching consequences, impacting financial markets and elevating the level of volatility. The conflict also triggered a surge in oil prices, raising concerns about the stability of the Middle East, a region responsible for nearly a third of global oil supply. In addition, the U.S. dollar strengthened in response to these developments.

Gold’s Unusual Year.

Gold’s performance has been rather unusual this year, marked by a period of low volatility despite rising bond yields. Typically, surging bond yields would exert downward pressure on gold prices. However, the precious metal defied this trend until recently.

The growing consensus that the U.S. Federal Reserve will maintain higher interest rates for an extended period to combat inflation had contributed to the recent decline in gold prices.

Israel-Hamas Conflict Heightens Geopolitical Risks.

The ongoing Israel-Hamas conflict has not only led to a considerable loss of life but has also heightened geopolitical risks, prompting investors to seek safe-haven assets. The situation is further complicated by the closure of the U.S. bond market on the day when gold prices surged.

Edward Moya, senior market analyst at Oanda, emphasized that “Gold prices are rising as a new geopolitical risk has investors scrambling for safe havens.” He also pointed out that the Israel-Hamas war had taken the markets by surprise, and there is a heightened risk that it may spread further throughout the Middle East.

Moya also identified near-term technical support for gold at the $1,920 level, suggesting that gold prices may continue to respond to the evolving geopolitical situation in the region.

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