XAU/USD boosted on increased central bank purchases

Gold futures continue to rise since the beginning of daily trading on Thursday, driven by increased demand for the precious metal by central banks worldwide. No tangible developments have taken place regarding the current situation in the Middle East since Iran launched attacks on Israel with missiles and drones, and Israel pledged to respond, which is also in favour of gold price.

Spot gold contracts rose to $2,382.42 per ounce at the time of writing, up +0.94% compared to the previous daily close, which recorded $2,360 per ounce. Precious metal contracts fell to their lowest level on the current trading day at $2,361, compared to the highest level of $2,392.

Central banks’ purchases of gold have recently witnessed a significant surge, seeking a safe haven and a hedge against market fluctuations amid severe tensions that continue to escalate in the Middle East region.

China added 160,000 ounces to the nation’s strategic reserve of gold – as part of moves to diversify foreign exchange reserves – last March, which highlights the increase for the seventeenth consecutive month in Chinese gold reserves, which comes amid a state of weakness that dominates the performance of the Chinese yuan, whose position as the world’s second largest reserve currency was weakened by this decline.

At the same time, Japan, Russia, Turkey, and Poland have expressed concerns about over-reliance on the US dollar as a reserve currency, which highlights a new trend for these countries to turn to gold to increase monetary reserves.

After recording losses on Wednesday, the price of gold (XAU/USD) rose to $2,380 in the early American session on Thursday. The precious metal is up as investors worry that if Israel retaliates violently against Iran, tensions in the Middle East may escalate and affect more than just Gaza.

The Times reports that Benjamin Netanyahu, the prime minister of Israel, has made it clear that “their state will do everything necessary to defend itself.” Following his meeting with the foreign ministers of Germany and the United Kingdom, Prime Minister Netanyahu made the following remarks.

The increase in US Treasury yields, which are determined by the Federal Reserve’s projection for interest rates, has not had an effect on the recovery in gold prices. As the 10-year US bond yield approaches its five-month high of 4.70%, it rises to 4.64%. Generally speaking, storing non-yielding assets like gold is less expensive when interest-bearing assets have lower yields.