Gold Closes Higher Ahead of An Uncertain Weekend
The global uncertainy is increasing and risk assets are tumbling, while safe havens are coming into play and are surging. According to reports from the Middle East, Israel has ordered all inhabitants in Gaza to evacuate the city and migrate to the south within the next 24 hours. Fear is spreading once more, leading to a similar reaction in financial markets as we witnessed on Monday.
10-year Treasury rates are down 12 basis points to 4.60%, while the stock market are now down too, with European indexes now down a bit more than 1%. Gold is presently up 1.3% to $1,887, while WTI crude is up almost 4% to $86.16 on the day. It’s exactly what you’d anticipate to see in the markets from an escalation in the Israeli-Palestinian conflict.
This week’s Gold rally has several components in it. A rebound off the technical support in the low $1,800s. As the graphic shows, Gold bounced from these levels in March as well. Recent weakness in the US currency and concerns over US debt is another factor. The awful Treasury auction this week was just one piece of evidence that deficits are driving the current spike in long-term Treasury rates. If that scenario continues to unfold, Gold will reach new heights.
The most significant reason, however, is the harsh escalation of the situation in the Middle East. The concern is that it will spread beyond Israel and Hamas. There are signs/comments that Israel may launch an attack this weekend, and synchronized demand for crude Oil and Gold on Friday indicate a probable escalation.
Gold has climbed more than $100 from its lows late last week, with all of today’s $50 surge coming from the tensions in the Middle East, but it also coincides with Treasury rates sliding back down on Friday after the surge on Thursday. Usually, geopolitical buy Gold trades should fade at some point because the reality of conflict seldom matches the fear (at least for those of us who aren’t in it), but if the rise is more about technicals and deficits, it might stretch further and last longer.
Gold XAU Live Chart
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