As tensions between Israel and Hamas continue to escalate, investors are seeking shelter in safe-haven assets like gold. Despite the recent surge in US bond yields, which typically hurts gold prices, the metal has managed to gain over 8% since mid-October. Analysts attribute this resilience to the growing concern about geopolitical risks, particularly in the Middle East.
The possibility of a ground invasion by Israel in response to recent terrorist attacks has raised fears of increased violence and instability in the region. This environment favors gold, which often performs well during times of heightened uncertainty. As a result, XAU/USD has broken above crucial resistance levels and is now eyeing a potential breakout towards $1,985 – a 61.8% Fib retracement of the May/October decline.
However, if sentiment improves and the risk premium on safe-haven assets decreases, gold prices could experience a correction. Support lies around the 200-day SMA at $1,940, with further weakness potentially leading to a test of $1,920. For now, though, investors appear to be prioritizing geopolitical risk over yield movements, making gold an attractive option despite the otherwise unfavorable fundamental conditions.