Conflicts in the Middle East fuel demand for safe havens
The ongoing conflict in the Middle East, especially between Israel and Hezbollah, was a major driver of the gold price rally. As Hezbollah escalated its military involvement, instability in the region increased, prompting investors to seek the safety of gold. The lack of resolution in the conflict and increased geopolitical risk pushed gold to new highs, with the price reaching a record $2,722.65 on Friday.
Central bank easing is supporting gold’s rally
Expectations of continued monetary easing also played a major role in last week’s rally. The Federal Reserve is widely expected to cut rates in November, with markets pricing a 92% chance of a 25 basis point cut. Looser monetary policy tends to make non-yielding assets like gold more attractive because they lower the opportunity cost of holding bullion.
Adding to the bullish momentum, the European Central Bank (ECB) made its third rate cut of the year, with further easing expected, boosting demand for gold as a hedge against uncertain economic conditions.
Economic data presents mixed signals
Despite the bullish momentum in the gold sector, US economic data painted a mixed picture. Retail sales rose 0.4% in September, exceeding expectations and signaling continued resilience in consumer spending. However, the housing market showed weakness, with the number of new homes and building permits falling, increasing speculation that the Federal Reserve will maintain its dovish stance. This combination of strong consumption and softer housing data is expected to support gold as investors remain cautious about the broader economic outlook.
Geopolitical and economic uncertainty keep gold in sharp focus
In addition to geopolitical risks, investors are closely watching the upcoming US presidential election, which has further fueled market uncertainty. Safe haven assets such as gold continue to be the focus, with analysts predicting further price increases in the near term. According to market forecasts, gold could rise to $3,000 per ounce within the next six to 12 months, driven by both geopolitical and economic factors.
Forecast for next week
After reaching its new all-time high, gold is expected to continue its bullish trend, supported by ongoing geopolitical tensions and expectations of monetary easing. While there may be some short-term profit taking, the broader outlook remains positive, with strong demand likely to continue.