Israel-Palestine war boosts safe-haven demand for gold; yellow metal prices rise more than 1%

Gold opened on the Multi Commodity Exchange (MCX) on Monday at Rs 57,476 per 10 grams and hit an intraday low of Rs 57,000. In the international market, prices hovered around $1,851.35 per troy ounce. Meanwhile, silver opened at Rs 68,740 per kg, hit an intraday low of Rs 68,570 on the MCX, and hovered around $21.84 per troy ounce in the international market. 

Gold prices rose more than 1 per cent today in early trade, as clashes between Israeli and Hamas forces over the weekend raised the risk of a wider Middle East conflict and boosted demand for safe-haven assets like bullion. 

"Today, the Hamas-Israel war is boosting safe-haven demand for gold. The metal is up nearly 0.90 per cent at $1849. The metal may gain further as the war intensifies with the rising death toll," says Praveen Singh, Associate VP, Fundamental Currencies and Commodities, Sharekhan by BNP Paribas. 

Spot gold snapped its nine-day losing streak to settle with a gain of 0.69 per cent at $1833 Friday on the US  hourly earnings and unemployment rate coming in slightly worse than their respective forecasts. 

Total known global gold ETF holdings fell for the sixth consecutive day through October 5 as investment demand remains lacklustre. 

Anuj Gupta, Head of Commodity and Currency at HDFC Securities, said that the premium of gold in the physical market increased sharply from Rs 700 to Rs 2000 per 10 grams. Earlier, it was Rs 1300 per 10 grams. Even in a few places, Bullion dealers are denied to sell gold. 

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"Geopolitical tension again increased the potential of gold and silver. Apart from festival demand in India, it is also supportive of India. Recently, we saw that gold corrected almost 5,000 points from its high and silver corrected 13000 points from its high, so Bullion lovers are rushing the market to buy to get the benefit of lower levels," said Gupta. 

Fed officials in the previous week continued to prepare the market for one more rate hike this year, which kept the dollar index and US Yields near their recent highs. 

US non-farm payroll data showed strong job additions while the unemployment rate and average earnings missed expectations, supporting bullions. 

Manav Modi, Analyst, Commodity and Currency, MOFSL, said that Hamas fighters rampaged through Israeli towns as the country suffered its bloodiest day in decades on Saturday. Israel battered Palestinians with air strikes in Gaza on Sunday, with hundreds reportedly killed on both sides. "If this unrest persists, we could continue to witness an upside in safe-haven assets and a fall in riskier assets," said Modi. 

Physical gold demand improved in some Asian hubs last week as a recent price dip attracted buyers, with premiums in India hitting a 17-month high as jewellers stocked up ahead of the festival season. 

"Along with geopolitical uncertainty, china re-opens after a week-long holiday, focus also shifts to CPI & IIP data from major economies and comments from several Fed officials," Modi added.