The gold market has gotten a solid boost in recent trade from the Hamas attack on Israel that took place over the weekend. Hamas attacked Israel on Saturday in a move that took the country by surprise. The worst attack on Israel in some 50 years has already left 1500 dead and many more injured. Some have been kidnapped and taken prisoner as well by both sides. The conflict has gotten the attention of the U.S. and other nations. The U.S. has already moved a carrier strike group into the region as a show of force and to provide some stability to its Israeli ally.
The first few days of the conflict have been ugly. The situation could turn a lot uglier, however, if the U.S., Iran or other nations see fit to get involved. The war on Hamas comes at a bad time, when the war in Ukraine continues to rage on. The threat of World War III has never been so severe, and that threat may keep buyers looking to gold as the uncertainty grows. The flight to safety bid could put gold back above the key $1,900 level in the days ahead. If the bulls are able to mount a close above this level, the market could see renewed bullish optimism and could move quite a bit higher and do so rapidly.
Global military conflicts are not the only major catalyst for the gold market right now. Inflation, the Fed and interest rates all remain at center stage. Rates are the highest they have been in many years now, and the Fed could elect to take them even higher if inflation does not abate further in the months ahead. The Fed has signaled already that it intends to hold rates higher for longer. This idea may be what is keeping the gold bulls at bay, for now. At some point, likely when there are strong signs of recession, the Fed will signal a course reversal. At that time, the gold bulls may vigorously reenter the market and take the market back to all-time highs or beyond.
The gold bears remain in control of the daily chart. The four-month old downtrend remains in place. The bulls have some work to do yet to negate this downtrend. The market is likely to see a resurgence of buying if the bulls are able to produce a close above $1,900. The bears are shooting for a downward move and a test of the $1,800 level. Whichever level is violated first, on a closing basis, is likely to determine gold’s fortunes for the foreseeable future.
The metal appears to be waiting on a fresh catalyst to recover recent losses and to move higher. The Israeli war with Hamas could be such a catalyst, especially if other nations decide to get involved. This could lead to World War III, and investors would likely try to get their hands on as much gold as possible.