Gold prices climbed more than 1% on Monday as dramatic clashes between Israeli and Hamas forces over the weekend raised the risk of a wider Middle East conflict and spurred a rush to safe haven investments like bullion.
Israel pounded the Palestinian enclave of Gaza on Sunday, killing hundreds of people in retaliation for one of the bloodiest attacks in its history when group Hamas rampaged through Israeli towns on Saturday.
Spot gold jumped 1% to $1,849.51 per ounce by 0317 GMT, having hit its highest level in a week. US gold futures climbed 1.1% to $1,863.70.
“Gold has regained its safe-haven status following the geopolitical events over the weekend,” City Index Senior Analyst Matt Simpson said.
“We see the potential for gold to head for $1,880, but unless we see bond yields move materially lower, I doubt it can break $1,900 any time soon.”
The spiralling violence threatens to start a major new war in the Middle East, sending oil prices higher and boosting the demand for safe-haven assets like Treasuries, the dollar, the Japanese yen along with gold.
But bullion’s upside remained capped by strong US economic data that has bolstered the view that the Federal Reserve is unlikely to end its monetary policy tightening cycle in the near term.
Data last week showed US employment increased by the most in eight months in September, pointing to persistent labour market strength.
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A hot inflation print later in the week could pave the way for another US rate hike this year.
Higher US rates raise the opportunity cost of holding gold, which yields no interest.
Among other metals, spot silver gained 0.7% to $21.75 per ounce, platinum was up 0.6% to $882.12 and palladium fell 0.3% to $1,154.49.