Middle East Tensions Fuel Gold Demand

Gold prices rose on Friday and were set for a second straight weekly gain, with demand bolstered by the Middle East conflict and expectations that the Federal Reserve’s rate hikes are nearing an end.

Spot gold improved 0.4% at $1,982.29 U.S. per ounce. U.S. gold futures added 0.7% to $1,994.20.

Israeli Defense Minister Yoav Gallant told troops gathered at the Gaza border on Thursday that they would soon see the Palestinian enclave “from inside,” implying that an expected ground invasion to annihilate Hamas could be nearing.

Gold, often used as a safe store of value during times of political and financial uncertainty, has risen 2.4% this week.

Fed Chair Jerome Powell in his remarks to the Economic Club of New York agreed “in principle” that the rise in yields was helping to further tighten financial conditions and “at the margin” might lessen the need for additional rate increases.

Higher interest rates raise the opportunity cost of holding gold.

Markets are widely expecting the Fed to keep interest rates on hold at its policy meeting next month, according to the CME FedWatch tool.

Spot gold is expected to extend gains into a range of $1,998-$2,010 per ounce, as it has broken a resistance at $1,972, according to Reuters technical analyst Wang Tao.

Spot silver fell 0.4% to $22.94 U.S. per ounce, but was headed for a second weekly rise. Platinum eased 0.3% to $888.34 U.S. and palladium gained 0.1% to $1,114.53. U.S.

gold silver markets reserve policy interest rates fed store of value palladium