Investing.com – Gold prices (Spot) are now rising to levels of $2,385.18 per ounce, an increase of 1.1% at the time of writing.
Gold prices (future contracts) also rose by 1.7% to $2,400.6 per ounce, and this came at a time when the US dollar maintained its rise and is now recording 106.005, an increase of 0.16% against a basket of foreign currencies.
The reason for the rise now…the escalation of the war
The acceleration of gold’s rise came as a result of the announcement that it had prepared its response to the Iranian attack. This announcement came despite Iran’s announcement that its strike on Israel and its air attack with drones had ended and that it did not intend to continue the strike against Israel.
The Israeli war cabinet decided to respond “clearly and strongly” to the missile and drone attack carried out by Iran on Saturday, the Times of Israel reported Monday, citing local Channel 12.
The report stated that Defense Minister Yoav Galant and IDF Chief of Staff Herzi Halevy believe that Israel should take action in response to the attack, but without harming the US-led coalition that played a crucial role in helping Israel defend itself against the Iranian attack.
Israel intends to convey a message that it “will not allow an attack of this magnitude against it to pass without a response.” The media added that the response would be in coordination with the United States.
Iran said through official sources that in the event of any Israeli attack, its response will be immediate.
Is the gold rally real?
Capital Economics commented on the current situation, considering it the peak for 2024. Carolyn Payne, chief commodities economist at Capital Economics, said in a report published on Friday that although she is optimistic about gold for this year, the price has far exceeded expectations, and she expects Prices will fall back to earth by the end of the year.
“The 16.5% rise in the price of gold since the beginning of the year appears increasingly inconsistent with interest rate expectations,” Bain said in its latest note. “In fact, last Friday’s strong US employment report and March’s CPI report, which arguably suggests interest rates may be higher for longer, coincided with the price of gold rising, while yields and the US dollar also rose.”
Bain said it is maintaining its year-end target price for gold at $2,100 per ounce. Meanwhile, it sees prices ending the year at around $26 per ounce.
Although gold has fallen from its highest level on Friday, the precious metal continues to achieve strong gains in record territory. June stock traded at $2,394.10 per ounce, up nearly 1% on the day.
Although geopolitical uncertainty surrounding the growing chaos in the Middle East has generated safe-haven gold demand in recent weeks, it is not a sustainable trend, Payne said.
“Other safe havens, such as the Swiss franc, have not performed as strongly, and there have been continued outflows from gold ETFs,” she added.
Blain said the biggest driver of gold this year, which helped the precious metal defy headwinds from changing monetary policy expectations, was demand for physical bullion in China.
Ben expected that demand for gold would weaken at the end of the year in China. “Chinese investors’ interest in gold is not surprising given that potential investment opportunities in China have narrowed given declining property valuations and falling stock prices there over the past two years,” she said. “However, we expect the Chinese frenzy around gold to eventually fade, and for traditional price drivers to take over later in the year. This view is based in part on our expectations that Chinese stocks will partially recover in the coming years.”
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