Posted by Chong Ming Wong on 11 Oct 2023

Conflict in Israel leads to gains in Gold and Silver, safe-haven assets

Image: Gold and silver bullion bars stacked against each other.

Recent escalations in the Israel-Hamas conflict have seen gold prices rise globally, as investors flock towards safe-haven assets. According to the Business Times, gold prices had their biggest one-day jump in five months on Monday, closing about 1.6 percent higher.

On Tuesday (10th October), spot gold rose 0.2 percent to US$1,864.39 per ounce by 0117 GMT, earlier hitting its highest since Sep 29. US gold futures climbed 0.8 percent to US$1,878.20. This follows comments from US Federal Reserve officials suggesting that the recent surge in Treasury yields might reduce the need for more rate hikes, sending the US dollar lower.

There are fears the current conflict may escalate to neighboring countries, thus affecting the supply of oil from the Middle East. Oil prices jumped more than $4 a barrel in early Asian trade on Monday. If oil prices continue rising, that could cause a ripple effect on prices across the world.

“Gold prices are rising as a new geopolitical risk has investors scrambling for safe-havens on a day the US bond market is closed,” said Ed Moya, senior market analyst at Oanda. “The Israel-Hamas war stunned markets and the risks are elevated that this could spread further across the Middle East.”

With Israeli Prime Minister Benjamin Netanyahu saying retaliation has “only started,” and “what we will do to the enemy will echo down through generations,” it appears this conflict will not be resolved swiftly. That’s another strong reason why the Federal Reserve may not continue to raise rates, especially with the potential of elevated oil prices looming.  

Whether the metal will again hit the highs of April remains to be seen, but the current signs seem to indicate that there is room for gold and silver prices to go up further. If we also consider how physical gold and silver tend to react during a crisis, and the uptake in demand from China we reported on earlier, then this might be a good time to add more physical gold and silver to your portfolio.