The precious metal’s gain accelerated on Friday as it broke through an important technical level, rising as much as 2.8%, and is now on track for its best week in almost seven months
Gold recorded its biggest rise since March, surpassing $1,900 an ounce, as pessimistic investors were caught off guard by the conflict between Israel and Hamas, which threatens to escalate.
The precious metal’s gain accelerated on Friday as it broke through an important technical level, rising as much as 2.8%, and is now on course for its best week in almost seven months, with the pace of the recovery suggesting short covering by fund managers.
“Funds went into last weekend short and the effort to cover and return to long positions was one of the main drivers of the recovery this week,” said Ole Hansen, head of commodity strategy at Saxo Bank A/S.
It’s a quick recovery for gold after a fall that took it close to $1,800 an ounce, fueling concerns of a sharper downturn driven by rising US treasury bond yields. An attack by Hamas militants on Israel has heightened anxiety of an escalation in the region that is critical to global energy supplies, driving up demand for safe-haven assets such as gold.
The United Nations said Israel had called for the evacuation of 1.1 million people living in northern Gaza in the next 24 hours, describing the order as “impossible” and calling for a reversal. Protesters marched against the country in several Middle Eastern nations after Hamas called for demonstrations across the Muslim world.
Gold also received support from members of the Federal Reserve, who signaled that rates don’t need to rise further to control inflation. Lower interest rates are generally positive for gold, although the rigidity of price pressures was underscored by this week’s inflation data.
Gold’s rise is “a reminder not to get (fundamentally) too sold on a Fed that bets on higher interest rates for longer, when geopolitical risk is rising,” said Nicky Shiels, head of metals strategy at MKS PAMP SA.