Middle East unrest fuels gains for gold while US currency and bonds decline

10 Oct 2023 , 09:47 AM

Tuesday saw a more than one-week high in gold prices, following a day of significant gains as the Middle East war intensified market turbulence and the currency and bond yields were pressured by dovish comments from key Federal Reserve officials.

Spot gold increased 0.2% to $1,864.39 per ounce after reaching a record high on September 29. To $1,878.20, U.S. gold futures saw a 0.8% increase.

Gold prices experienced their highest one-day increase in five months on Monday as military confrontations between Israel and the Palestinian Islamist group Hamas stoked concerns that a wider conflict could damage Middle Eastern oil supplies and increased demand for safe-haven assets like gold.

Investors are seeing increased volatility as a result of the confrontation, which also heightens concern ahead of the corporate earnings season and significant U.S. inflation data later this week.

Reference 10-year At the opening in Tokyo, Treasuries experienced their sharpest surge in more than a month.

The U.S. dollar index dropped after top Fed officials said on Monday that the Fed would refrain from raising its short-term policy rate further due to rising yields on long-term U.S. Treasury notes.

Investors downplayed the chances of more Fed rate increases as a result of the comments made by Fed Vice Chair Philip Jefferson and Dallas Fed President Lorie Logan.

When the economy is uncertain, gold is typically viewed as a safe-haven investment. However, because gold pays no interest, its appeal tends to decline when interest rates rise.

The largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, reported that its holdings decreased 0.5% to 861.81 metric tonnes on Monday.

Spot silver increased by 0.2% to $21.94 an ounce, platinum increased by 0.4% to $889.53, and palladium increased by 1.3% to $1,154.34, among other metals.

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