Gold prices experienced a drop from the $2,000 per ounce mark in the wake of Israel's ground offensive in Gaza, which unfolded at a pace less aggressive than anticipated by market observers. Following a 1.1% rise on Friday, bullion saw a decline as Israeli troops and tanks advanced into the northern Gaza Strip, marking what Israel described as the second, more extended phase of its military campaign against Hamas.
Since the onset of the conflict on October 7, when Hamas launched attacks on Israel, gold has seen an uptick of over 9%, with investors flocking to this traditional safe-haven asset. Market sentiment suggests that gold could further benefit if regional tensions intensify, given the geopolitical importance of the area, especially in terms of global energy supplies. Rhona O’Connell, an analyst at StoneX, noted that gold is potentially forming a foundation for additional gains, contingent on the geopolitical landscape.
Amidst the conflict, the trajectory of US interest rates and Treasury yields have overshadowed gold's pricing dynamics. This week, the market's gaze is fixed on decisions by major central banks, including the Federal Reserve, which could influence borrowing costs. In addition, the Treasury Department's upcoming announcement regarding its new borrowing strategy has grabbed attention, as it will indicate the extent of long-term debt sales aimed at covering the expanding budget deficit.
Spot gold settled at $1,997.32 per ounce by late afternoon in London, showing a 0.5% decline. Meanwhile, the Bloomberg Dollar Spot Index dropped by 0.3%. While gold witnessed this slide, other metals like silver and platinum saw gains, with palladium remaining stable.
