Gold prices near 1-month high as tensions escalate in the Middle East

The bombing of a hospital in Gaza, which reportedly led to the deaths of hundreds of Palestinians, signaled a potential escalation in the conflict, especially as Egyptian and Palestinian leaders canceled a summit they were to hold with US President Joe Biden following the attack.

This move has raised concerns that the Israel-Hamas conflict could draw in other Arab countries and that the war could spread across the wider Middle East region.

This sentiment has increased investor demand for safe havens, and gold has seen strong inflows following this move. Spot gold rose 0.8% to $1,937.80, while December gold futures rose 0.8% to $1,950.65.

Both instruments hovered near a one-month high.

Growing concerns that the Israel-Hamas war will escalate have provided significant support for gold prices over the past week, as demand for traditional safe havens has increased. Gold had posted a 5% gain the previous week.

However, this demand has eased somewhat in recent sessions, particularly with the resurgence of fears that interest rates in the US will rise. Retail sales data also fueled fears that inflation will remain sticky. This could lead the Fed to take a more hawkish stance.

To that end, focus this week will be on a series of economic indicators from the US and Fed officials, particularly a speech to be given by Chair Jerome Powell on Thursday. Given the recent rise in inflation, any hawkish signals from Powell will be closely watched.

Rising interest rates are a bad sign for gold prices as they increase the opportunity cost of investing in the yellow metal. This trend hit gold prices hard last year. Even if safe-haven demand increases, it is likely to limit any major gains in the yellow metal.

Copper rises as China's GDP beats expectations

Among industrial metals, copper prices showed a sharp increase after China, the largest importer, recorded better-than-expected growth in the third quarter.

Copper rose 0.6% to $3.6128.

China's third-quarter gross domestic product grew by 4.9%, higher than expected, showing that the stimulus measures recently taken by Beijing are beginning to bear fruit.

However, although quarterly growth exceeded the consensus, it largely remained below pre-COVID-19 levels, indicating that there is still a long way to go for a larger economic recovery.

Nevertheless, the data, combined with positive industrial production figures for September, raised hopes that economic conditions in the world's largest copper importer will improve and stimulate demand.

All eyes are now on the People's Bank of China's loan prime rate decision on Friday. The bank is expected to keep interest rates unchanged.