Gold surges as Israeli crisis continues

Gold prices jumped to $1,850 per ounce in Monday’s opening from $1,830 per ounce on Friday. Gold prices continued to rise on Monday, climbing above $1,860 per ounce. If gold prices increase, resistance may be encountered near $1,880 per ounce, while if gold prices decline, further support may be found near $1,800 per ounce. 

The crisis in Israel has intensified, giving rise to a risk aversion sentiment, and boosting demand for gold. Fears of the Israeli war spreading to the Middle East are increasing the appeal of haven assets such as gold. 

Gold prices have been predominantly directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar was volatile on Monday, with the dollar index climbing to 106.5 in early trading and then dropping to 106.1 later in the day. US bond yields remained at Friday’s levels as Monday was a Bank holiday in the US with the US 10-year bond yielding approximately 4.81%.           

Increases in central banks’ interest rates put pressure on gold prices since assets yielding interest become a more appealing investment compared to gold as interest rates rise. FOMC members voted last week to keep interest rates unchanged at a target range of 5.25% to 5.50%. 

The Federal Reserve decided to pause rate hikes at its latest meeting, but that does not necessarily mean it has reached its rate ceiling. The Fed is likely to keep interest rates at high levels for longer to bring inflation down. At the same time, other major central banks are maintaining high-interest rates. Gold prices are under pressure since gold presents a less attractive option as an investment than interest-yielding treasury bonds.

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Written by:
Myrsini Giannouli

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