Global oil prices may not be reaping the expected risk premium from the recent turmoil in the Middle East, but gold is once again proving its mettle as a preferred safe-haven asset, especially following the recent weakening of the U.S. dollar.
Gold’s most-active futures contract on the New York Comex, for December, concluded with a $12, or 1%, gain, reaching $1,887.30 per ounce, after hitting a session high of $1,890.85. This brought the benchmark gold futures contract within $10 of revisiting the psychologically significant $1,900 level. The last time Comex gold traded in the $1,900 range was on September 27.
The spot price of gold, closely monitored by many traders, stood at $1,874.33, marking a $13.81, or 0.7%, increase for the day. The peak during the session reached $1,858.70.
Gold’s ascent was driven by the retreat of the U.S. Dollar Index from its 11-month peak last week, along with a decrease in bond yields linked to the U.S. 10-year Treasury note, which had recently reached levels not seen since 2007.
Ed Moya, an analyst at the online trading platform OANDA, pointed out that “falling global bond yields continue to fuel gold’s price rally.” He added that gold is attracting inflows due to uncertainties stemming from the Israel-Hamas conflict and the Federal Reserve’s efforts to temper economic overheating.
Moya highlighted that gold had already recovered around 40% of the losses it incurred over the past month. He further noted that “bullish momentum might persist until the price nears the $1,896 level. If Wall Street becomes convinced that interest rates have peaked and the likelihood of further tightening in 2024 is low, gold could stage a rally beyond the $1,920 level.”