Despite tension in the Middle East, gold prices gradually increase; spot silver surges by 1.8%

Gold prices have surged due to geopolitical unrest in the Middle East, prompting investors to seek safe-haven assets. As of Wednesday morning, spot gold rose by 0.4% to $2,391.10 per ounce after reaching a record high of $2,431.29 on Friday. Despite this increase, U.S. gold futures saw a slight decrease by 0.1% to $2,405.40. Analysts suggest that escalating tensions could push gold prices towards the $2,500 range while central bank actions and investor sentiment will also play crucial roles in determining future prices.

Iran’s readiness to counter Israeli aggression has added to the geopolitical uncertainty, fueling demand for gold as a hedge against risk. The recent direct assault on Israel by Iran in retaliation to a suspected Israeli attack on an Iranian diplomatic facility has further heightened tensions in the region. Additionally, statements from U.S. Federal Reserve officials, including Chair Jerome Powell, hint at maintaining a tight monetary policy stance, dampening hopes for imminent interest rate cuts.

Despite the uncertainties surrounding interest rates, the market shows a 67% likelihood of a U.S. interest rate decrease by September. Elevated interest rates make gold less attractive as it does not yield interest, affecting its demand. While gold prices have shown little correlation with the movements of the U.S. dollar and Treasury yields recently, short-term reactions to changes in these factors cannot be ruled out. Spot silver also experienced a 1.8% increase, reaching $28.60.

Looking ahead, the global silver market is expected to face a deficit, driven by increased industrial consumption and a decline in overall supply by 2024. In contrast, spot platinum declined slightly to $953.75, while palladium strengthened to $1,031.00. Analysts continue to monitor the market closely for any further developments that could impact precious metal prices.