Conflict in the Middle East is increasing demand for safe haven assets
The war waged by Israel against Palestine in retaliation for recent brutal terrorist attacks has caused significant market movements at the beginning of the new week. US bonds, gold, USD and JPY are all trading higher today. At one point, oil was up by about 5%. Among these, only the USD has remained strong consistently in recent times, while bonds, gold, and oil have been heavily sold off since the end of September and into October.
During times of escalating conflicts, gold is often seen as a hedge against declines in other assets, especially in relation to the stock market. The increase in gold prices may not seem significant at around 1.2%, but it comes after weeks of substantial sell-offs. It is also a response to the rise in American bond prices, as evidenced by a clear increase in TNOTE.
The current conflict remains a major uncertainty for financial markets because theoretically, it could lead to greater involvement of various other parties worldwide. Hence, oil is losing value as approximately one-third of the world's oil supply is concentrated in the Middle East region.
From a technical point of view, GOLD is continuing the bounce off the $1,810 area started on Friday. Price launched new week's trading with a big bullish price gap and traders should be aware of possible attempts to fill this gap during the day. However, if bulls remain in control, the next resistance levels to watch can be found at $1,875 (23.6% retracement) and $1,885 (local lows from August). Source: xStation5
