Gold consolidates price rally as Middle East uncertainty weighs on investors
Gold dipped in trading today, but prices remain elevated with safe haven demand high amid fears of further geopolitical uncertainty and economic volatility over Gaza.
While the precious metal slid from $2,004 per ounce to $1,997 per ounce in early sessions this morning, it has mostly consolidated Friday’s spike — when prices bounced from $1,980 per ounce to $2,006 per ounce.
Prices initially rallied after Israel stepped up its military operations against Hamas in Gaza last week.
This has raised the prospect of further escalation and the conflict drawing in other countries in the region, including Lebanon and Iran.
The situation could lead to sanctions and supply disruption, raising concerns over the stability of the world’s economy and commodity markets.
Rupert Rowling, market analyst at Kinesis Money, said: “The huge increase in geopolitical tensions . . . will keep demand for haven assets, principally gold, supported for the foreseeable future with no quick end to the conflict in sight.”
There is also a raft of central bank announcements this week, including interest rate decisions from the US Federal Reserve, the Bank of England and the Bank of Japan.
While all three central banks are expected to leave interest rates unchanged, they remain historically high and have been a weight on prices — despite historically elevated levels.
Rowling predicted prices would stabilise and remain near current trading levels over the coming week’s trading.
He said: “This safe haven demand is set against a macroeconomic climate that would otherwise be bearish for gold, with interest rates set to remain higher for longer. As such, the next few weeks could see gold trade within a narrow range either side of $2,000 an ounce, depending on how the situation in Gaza unfolds.”