Gold rises to three-month high on Middle East

Gold rises to three-month high on Middle East

Gold rises to three-month high early Friday, on the Middle East conflict between Israel and Hamas and speculation that Federal Reserve rate hikes may soon come to an end.

Many market watchers fear that the war will escalate in the Middle East, and gold is a traditional hedge against geopolitical uncertainty. An end to high interest rates would also be bullish for the yellow metal, which becomes a more attractive investment when rates are lower.

Front-month gold futures rose 0.6% Thursday to settle at $1,980.50 an ounce on Comex, and the December contract advanced 2% in the first four days of the week. Bullion fell 5.1% in September after dropping 2.2% in August and rising 4.1% in July. The metal is up 8.5% in 2023. The December contract is currently up $10.60 (+0.54%) an ounce to $1991.90 and the DG spot price is $1986.30.

Comments from Israeli Defense Minister Yoav Gallant that Israeli forces “will soon see Gaza from the inside” were seen as a sign that a ground assault may soon begin. Gold prices have risen more than $135 an ounce since the conflict began.

Meanwhile Fed Chair Jerome Powell on Thursday signaled that the central bank is likely to leave interest rates unchanged next month, though he said that the Fed could still hike in the future if the economy is resilient. 

“Given the uncertainties and risks, and how far we have come, the committee is proceeding carefully,” he said at the Economic Club of New York. “We will make decisions about the extent of additional policy firming and how long policy will remain restrictive based on the totality of the incoming data, the evolving outlook and the balance of risks.” 

Wednesday, the Fed’s Beige Book economic survey of the 12 U.S. regional banks showed a “slightly weaker” U.S. economy and easing inflation. 

The Fed has raised rates by 5.25 percentage points since March 2022. The central bank held its benchmark interest rate at 5.25% to 5.50% in September. About 98.5% of investors tracked by the CME FedWatch Tool are betting that the Fed will keep its federal funds rate unchanged in November, while 1.5% expect it to cut rates by 25 basis points. There is also a meeting scheduled for December at which most investors also predict the Fed will hold. 

Front-month silver futures slipped 0.3% Thursday to settle at $23.03 an ounce on Comex, though the December contract advanced 0.6% in the first four days of the week. Silver decreased 9.5% last month after slipping 0.6% in August and gaining 8.5% in July. It’s down 4.2% in 2023. The December contract is currently up $0.264 (+1.15%) an ounce to $23.295 and the DG spot price is $23.41.

Spot palladium fell 2.2% Thursday to $1,128.50 an ounce, and it lost 2.8% in the first four days of the week. Palladium rose 3% last month after sliding 5.3% in August and rising 3.6% in July. Palladium has plummeted 38% so far this year. Currently, the DG spot price is down $5.50 an ounce to $1122.50.

Spot platinum gained 0.9% Thursday to $903.60 an ounce, and it increased 1.8% in the first four days of the week. Platinum declined 6.6% last month after advancing 1.7% in August and gaining 5.2% in July. Platinum is down 16% in 2023. The DG spot price is currently up $8.00 an ounce to $908.20.

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