The ongoing war between Israel and Hamas is affecting gold prices for the better while human lives are being lost on a daily basis. Indeed, gold is on pace to rack up its best month since November 2022, with demand for so-called “safe-haven assets” jumping due to investors’ worries about the ongoing between Israel and Hamas.
Spot gold prices have jumped 8% since the end of September 2023, topping $2,000 an ounce. Bullion prices have surged since Hamas’ first attack on Israel on October 7. Wall Street’s worries about that conflict have boosted safe havens, which tend to retain stable prices during times of geopolitical uncertainty.
Geopolitical instability is undeniably a major factor in driving up the price of assets such as gold. This is because when there is a war, investors often flock to safe-haven assets such as gold. After all, these types of assets are perceived as less risky. Thus, this increased demand drives up the price of gold.
Moreover, the Israel-Hamas war has been causing massive disruption to supply. The war has been disrupting mining operations and making it more difficult to transport gold. Hence, this reduced supply has also contributed to higher prices.
Israeli Currency Decline since The War with Hamas
Source: Google Finance
The war has deeply affected the value of the Israeli currency. Since the war started, the Israeli currency, the Israeli New Shekel, dramatically plummeted. This is because investors sell off the currency in favor of safer assets, such as gold. A weaker currency makes gold more affordable for investors in other countries, which can also lead to higher prices.
The ongoing war in Ukraine has been a major driver of the rise in gold prices in 2023. The war has caused significant geopolitical uncertainty and has led to disruptions to the global economy. Investors have responded by buying gold as a safe-haven asset. And now the war between Israel and Hamas is consolidating gold as a safe-haven asset, which will drive its price even higher than it already is.
Nevertheless, gold is lagging behind bitcoin. Indeed the token, which some crypto bulls see as a digital alternative to gold, has seen its value sore up by more than 25% in October, jumping thanks to investors’ optimism that American regulators will soon approve a spot bitcoin ETF.
If the war continues, the price of gold will surely keep propping up because demand for gold will continue to increase. Moreover, war is not the only factor that would maintain the price of gold at high levels. Inflation, which remains high in most countries, is also an important factor that increases the price of gold.
Inflation increases the price of gold because investors see gold as a hedge against inflation. When inflation is high, the value of fiat currencies, such as the US dollar, declines. This means that people can buy less with the same amount of money. Gold, on the other hand, is a physical asset that is not subject to inflation. As a result, investors buy gold to protect their wealth from the purchasing power erosion caused by inflation.
Overall, war is a major factor that can drive up the price of gold. This is because war creates uncertainty and instability, which leads investors to seek out safe-haven assets.