Recently, gold prices have seen a "V-shaped" rebound, soaring to their highest levels in four weeks, driven by escalating conflicts in the Middle East boosting safe-haven demand.
According to CNBC, as part of his Middle East tour this week, U.S. President Biden had initially planned to visit Jordan on Wednesday. However, the trip was canceled due to an explosion at a hospital in Gaza, resulting in hundreds of casualties.
The escalating tensions continue to bolster gold prices, which have risen about 6% since Hamas unexpectedly attacked Israel on September 7.
From September 25 to October 5, COMEX gold prices fell for nine consecutive days, touching a recent low of $1,834 per ounce, a decline of about 6%. Domestic gold prices also continued to drop, falling to 446 yuan/gram on October 6, a decrease of about 5% from mid-September highs. As gold is a non-interest-bearing asset, the surge in U.S. Treasury yields put pressure on its value.
However, starting October 6, the market trend reversed. COMEX gold experienced a "V-shaped" rebound, and by October 13, it surpassed the $1,900 mark again, closing at $1,928.5 per ounce, a significant daily increase of 3.32%.
Despite data showing that U.S. retail sales in September grew more than expected and industrial production strengthened, reinforcing the Federal Reserve's rationale for maintaining higher interest rates for an extended period, which is bearish for gold, spot gold still edged up on Tuesday, benefiting from safe-haven demand.
ANZ Bank believes that any escalation in conflicts will keep safe-haven buying robust. "This is happening at a time when there's strong physical market demand for gold, including from central banks and consumers in India and China."
Notably, a report from HSBC last week pointed out that while the end of the Federal Reserve's rate hikes might limit the downside for gold prices, consistently high interest rates could strictly cap the potential for gold to rise. "The factors influencing gold prices might not be how high the rates are, but how long they need to remain elevated."
However, HSBC also noted that increased uncertainties currently also support gold prices. The World Gold Council believes that gold is more likely to experience fluctuations rather than substantial weakness.
As of Wednesday's report, spot gold rose by 1.185%, trading at $1,958.60 per ounce.
