Gold prices saw modest gains in early U.S. trading on Tuesday, driven by increased safe-haven demand amid the ongoing Israel-Hamas conflict, which continues to unfold with uncertain consequences. December gold edged up by $4.70 to $1,869.00, while December silver slipped by $0.124 to $21.80.
Market observers are closely monitoring developments in the Middle East as Israel has declared war on Hamas. Surprisingly, the financial markets have not reacted as strongly to this major geopolitical crisis as many expected. The Wall Street Journal reported that markets reacted more strongly to the U.S. jobs report released last Friday than to the weekend violence in the Middle East, which was the worst Israel had experienced in 50 years. This lack of reaction suggests that the market is not currently factoring in a further escalation in the Israel-Hamas conflict, which would involve other countries like Iran, Syria, or the U.S. It is common for unexpected market shocks to prompt traders and investors to factor in a worst-case outcome, leading to a knee-jerk reaction. However, this time, that doesn’t seem to be the case. Despite the lack of reaction, there is a significant possibility that the Israel-Hamas war could escalate further, involving other countries. This uncertainty should be a cause for concern for traders and investors.
Asian and European stocks traded mostly higher overnight, while U.S. stock indexes are expected to open on a positive note.
The U.S. dollar index is slightly lower, while Nymex crude oil prices remain steady at around $86.25 per barrel. The yield on the U.S. Treasury 10-year note has dipped slightly amid the Middle East turmoil and is currently at 4.67%.
In terms of economic data, Tuesday will see the release of the NFIB small business index, the Johnson Redbook retail sales report, and monthly wholesale trade data.
From a technical perspective, gold futures continue to have a bearish near-term advantage. However, a potential market bottom is suggested by the “outside day” up on the daily chart last Friday and the gap-higher price move on Monday. While prices are in a four-month downtrend, these signs hint at a possible reversal. The next upside target for gold bulls is to close December futures above the strong resistance at $1,900. On the downside, the next target for bears is to push futures prices below the solid technical support at $1,800. The first resistance level is at $1,879.10, followed by $1,900. The first support level is at $1,857.50, and then at $1,850.
As for silver, bears maintain the upper hand in the near term, and prices are still trending lower on the daily chart. The next target for silver bulls is to close December futures prices above the solid technical resistance at $23. For bears, the next downside target is to close prices below the robust support at $20. The initial resistance is at $22, followed by this week’s high at $22.18. The first support level is at $21.50, and then at $21.25.