Gold Price Stabilizes Higher Amid Middle East Escalation Woes

Gold price has stabilized +0.40% trading at %2387.80 per ounce after the precious metal’s earlier surge at $2,417 per ounce following the escalating Middle East conflict between Israel and Iran. The price stabilized after Tehran indicated no immediate plans for retaliation, calming initial fears. US Treasury yields and the US Dollar’s decline support Gold’s gains, although Fed officials hint at ongoing restrictive monetary policy.

Gold hit a five-day high above the $2,400 figure amid an escalation of the Middle East conflict between Israel and Iran. An Israeli attack on Iran on Friday sent bullion toward its daily high of $2,417 a troy ounce as investors sought safety in the uncertainty of the outcome. However, the rally was short-lived as Tehran said it had no plans to retaliate.

The Gold Index, XAU/USD, traded at $2,394, registering gains of 0.70% after Golds seesawed $44.00 as traders digested Friday’s developments. The drop in US Treasury bond yields and the Greenback keeps the golden metal afloat, despite recent hawkish comments by Federal Reserve (Fed) officials. Chicago Fed President Austan Goolsbee exited from its dovish stance and stated that the inflation progress had “stalled,” adding that “the Fed’s current restrictive policy is appropriate.”

Gold remained underpinned during the week by the geopolitical risks linked to the Middle East conflict following Iran’s attack on Israel. The non-yielding metal is on its way to registering more than 2.25% weekly gains. The 10-year Treasury benchmark rate is up 8 basis points in the week at 4.615%, while US real yields are also up 8 basis points and will likely end the week near 2.215%.

The US Dollar Index (DXY), which tracks the buck’s performance against a basket of six other currencies, loses 0.05% to 106.15. Gold price is upwardly biased, though it seems that buyers could be losing momentum as Friday’s spike to $2,417 was courtesy of risk aversion. The Relative Strength Index remains at overbought levels, but it hasn’t surpassed the last peak, suggesting a slight divergence between price action and momentum.