Attack on Israel likely to increase attraction towards gold, safe haven assets

Israel's Iron Dome anti-missile system intercepts rockets launched from the Gaza Strip, as seen from Ashkelon, southern Israel

Israel’s Iron Dome anti-missile system intercepts rockets launched from the Gaza Strip, as seen from Ashkelon in southern Israel on October 7, 2023. Reuters/Amir Cohen acquires licensing rights

NEW YORK, Oct 8 (Reuters) – Violence in Israel will likely prompt a move towards safe-haven assets as investors closely monitor events in the Middle East to assess geopolitical risk to markets.

Gunmen from the Palestinian group Hamas crossed into Israel on Saturday in an unprecedented attack. Western countries, led by the United States, condemned the attack and pledged support to Israel.

Analysts said rising geopolitical risks could see buying in assets such as gold and the dollar and potentially increase demand for US Treasuries, which have been sold off aggressively.

“This is a good example of why people need gold in their portfolio. It’s an ideal hedge against international turmoil,” said Peter Cardillo, chief market economist at Spartan Capital Securities, who predicted that The dollar will also benefit.

“Whenever there is international turmoil, the dollar strengthens,” Cardillo said.

In recent weeks markets have been reacting to expectations that US interest rates will remain high for a long time. Bond yields have risen while the US dollar continues to rise. Meanwhile, the stock fell sharply in the third quarter but has stabilized over the past week.

“Whether this is a big market moment or not depends on how long it lasts and whether others are drawn into the conflict,” said Brian Jacobsen, chief economist at Annex Wealth Management, about the situation in Israel. Is.” Jacobsen questioned how much of an impact it would have on the price of oil even if Iran increased production.

The Hamas attack was openly praised by Iran and Iran’s Lebanese ally Hezbollah.

“Iranian oil production is rising, but whatever progress they are making behind the scenes with the US would be dramatically undermined by Iran celebrating Hamas’s actions,” Jacobsen said. “The potential production loss matters, but it won’t,” he said. Shatter the earth.”

“The most important thing is to see how Saudi Arabia responds,” Jacobsen said. Washington is trying to reach an agreement that will normalize relations between Israel and Saudi Arabia.

David Kotok, president and chief investment officer of Cumberland Advisors in Sarasota, Florida, said the situation is worrying because the US has been weakened by dysfunction in Washington. Republicans are searching for a successor to ousted House Speaker Kevin McCarthy, and a budget impasse looms.

“I am very concerned about more explosive situations, which require American determination and the American defense capability, which is being wounded,” Kotok said.

Reporting by Megan Davis; Editing by Lisa Shumaker

Our Standards: The Thomson Reuters Trust Principles.

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