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Potential Increase in Demand for Gold and Safe Haven Assets Amidst Israel’s Security Threat

Investors closely monitor Israel as geopolitical risk escalates

Investors around the world are closely watching the events unfolding in Israel, as the escalating violence poses a significant geopolitical risk to global markets. Many anticipate that this turmoil could lead to a surge in demand for safe haven assets.

Unprecedented attack by Hamas triggers concerns

On Saturday, gunmen from the Palestinian group Hamas carried out an unprecedented attack, infiltrating Israel. This act of aggression has drawn condemnation from Western countries, with the United States leading the charge in pledging support for Israel.

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Rising geopolitical risk drives investors towards safe haven assets

Market analysts believe that the increasing geopolitical risk could prompt investors to seek refuge in assets like gold, the dollar, and U.S. Treasuries. These safe haven assets are expected to experience heightened demand, especially as they have recently faced aggressive sell-offs. Peter Cardillo, chief market economist at Spartan Capital Securities, emphasizes the importance of including gold in investment portfolios as a hedge against international turmoil. Additionally, Cardillo predicts that the dollar will also benefit from the prevailing uncertainties. He notes that the dollar tends to strengthen whenever there is international conflict.

Market reactions and the role of U.S. interest rates

Recent market trends have been influenced by expectations of prolonged higher U.S. interest rates. This anticipation has led to soaring bond yields and a strengthening U.S. dollar. While stocks experienced sharp losses in the third quarter, they have stabilized in the past week. Brian Jacobsen, chief economist at Annex Wealth Management, suggests that the extent of market impact depends on how long the conflict in Israel persists and whether other nations become entangled in the situation. Despite Iran’s efforts to boost oil output, Jacobsen questions the potential effect on oil prices.

Iran’s celebration of Hamas attack raises concerns

The Hamas attack has garnered open praise from Iran and its Lebanese allies, Hezbollah. Although Iranian oil production has been on the rise, Jacobsen argues that their celebration of Hamas’s actions could undermine any progress made in behind-the-scenes negotiations with the United States. He believes that while the potential loss of oil output matters, it will not have a significant impact.

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Focus on Saudi Arabia’s response

Jacobsen highlights the importance of observing Saudi Arabia’s reaction to the situation. The United States has been actively pursuing a deal to normalize ties between Israel and Saudi Arabia. The outcome of this effort will be critical in shaping the geopolitical landscape.

Concerns over U.S. defense capability amid domestic challenges

David Kotok, chair and chief investment officer at Cumberland Advisors, expresses concerns about the current situation in the United States. With the dysfunction in Washington, as evidenced by the search for a successor to ousted Speaker Kevin McCarthy and a looming budget showdown, Kotok worries about the country’s ability to handle explosive situations and defend its interests.

Overall, the evolving conflict in Israel has significant implications for global markets. Investors are closely monitoring the situation, seeking safe haven assets, and awaiting further developments that may impact geopolitical dynamics.

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