After last week's price dip, gold and silver opened sharply higher this week as markets reacted to the surprise Hamas attack in Israel. With Israel declaring war on Hamas, the region faces further conflict that could have wide-reaching implications around the world.
Investors rushed to safe haven investments as markets opened Sunday night, sending the dollar higher and bringing some relief to spiking bond yields. Despite the higher dollar, gold and silver both rose, gaining 2% and 5.7% respectively in GBP from their lows last week. In USD gold has gained 2.9% since it’s low last Friday, with silver up 6.2% since it’s low on Thursday.
Markets are now watching to see what impact the conflict will have, both economically and geopolitically. Oil and gas prices have both increased on expectations that supplies will be disrupted, and rising energy prices will only add to the struggle to bring inflation down.
The US has already announced it is sending additional military ships to the area in response, and any escalation will spark further concern for a world already struggling with ailing economies and the ongoing war between Russia and Ukraine. Violence has continued into today from both sides, with no sign of the tension easing.
Stock markets, as has become increasingly common in recent years, appear to be somewhat disconnected from the events, instead taking relief in the reversal of bond yields. Comments from two Fed official that the recent bond yield spike could convince them not to hike rates have also prompted hopes that the peak is in. With yields now coming down, and a potential new source of inflation from the Middle East, the stock market optimism seems somewhat misplaced.
At $1,855 and $21.80 per ounce respectively, gold and silver have paused following their dramatic climb on Sunday evening but have held onto the gains in a sign the safe haven demand has remained. Military conflict is always a key driver for the gold price, as demonstrated in the spring of 2022 and the Russia-Ukraine war, and if events in Israel and Gaza spill over to the rest of the Middle East prices may yet have much higher to climb.