The price of spot gold has surged past $2700 per ounce for the first time, driven by escalating tensions in the Middle East which have prompted investors to seek safe-haven assets. Gold temporarily increased by 0.5% to $2706.81 per ounce as Israel announced the killing of Yahya Sinwar, a Hamas leader. Sinwar's attack on southern Israel sparked a prolonged conflict in Gaza. Currently, gold is trading at $2706.10 per ounce.
The Bloomberg Dollar Spot Index has dipped by 0.1%, ending a four-day increase streak. Meanwhile, other precious metals like silver, palladium, and platinum have also experienced gains. Israeli Prime Minister Netanyahu asserted that Israel will continue its military efforts until all hostages captured by Hamas last year are released, a stance contrary to U.S. President Biden's call for an end to the conflict. In uncertain geopolitical and economic climates, investors often turn to gold as a safety net.
This surge in demand for gold overshadows typical macroeconomic factors that usually suppress gold prices. A recent U.S. report reduced speculations on the extent of the Federal Reserve's easing. September's retail sales exceeded expectations, and initial jobless claims unexpectedly declined, supporting the view that the U.S. economy is far from recession. Rising interest rates generally pressure non-yielding assets like gold.
Gold prices have risen nearly 2% this week, as investors adjust their portfolios ahead of the U.S. elections on November 5. Regardless of whether Trump or Harris wins, gold may continue to benefit given the different economic risks both candidates pose. This year, gold has surged over 30%, making it one of 2024's top-performing commodities. The Federal Reserve's recent easing cycle and optimistic outlook on rate cuts have fueled this rise, alongside robust buying from global central banks providing long-term support to gold prices. Western investors have also contributed to the price increase.
During the first half of the year, Western investors largely stayed on the sidelines, allowing Asian demand to surge. The Federal Reserve's shift towards a more accommodative monetary policy has enhanced the appeal of gold-backed exchange-traded funds (ETFs). These ETFs are expected to see their gold holdings expand for the fifth consecutive month in October, marking the longest period of inflows since 2020.
