(Bloomberg) — Gold fell from above $2,000 an ounce — after breaching the threshold for the first time since May on Friday — as Israel’s ground invasion of Gaza appeared to be more cautious than it had initially vowed.
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Bullion slid after jumping 1.1% on Friday as Israel stepped up ground operations. Israel sent troops and tanks into the northern Gaza Strip in what it called the second and longer phase of its war against Hamas and is taking a day-by-day approach.
That eased fears that a massive invasion would lead to a regional escalation. Hamas is designated a terrorist organization by the US and the EU.
“Gold prices are notably lower in early Monday trade, but remember this is likely to be a long, drawn-out affair with many false dawns,” said Stephen Innes, managing partner at SPI Asset Management. “Hence, gold may not drift too far lower.”
The precious metal has been one of the biggest winners since Hamas attacked Israel on Oct. 7, rising more than 9% as demand for haven assets increased. It’s likely to continue benefiting should tensions increase as investors up bets on a spillover into the wider region which is crucial for global energy supplies.
The conflict has edged the US interest-rate path and Treasury yields as the main price driver for bullion. Still, rate decisions by major central banks — including the Federal Reserve — will be watched closely this week for the impact on borrowing costs.
Markets are also focused on the Treasury Department’s new borrowing plan, due hours ahead of the Fed’s interest-rate decision on Wednesday. The announcement will reveal the extent to which the Treasury will ramp up sales of longer-term debt to fund a widening budget deficit, with the selloff so far sending yields surging to the highest levels since before the global financial crisis. Higher yields are typically negative for non-interest bearing bullion.
Spot gold declined 0.5% to $1,997.08 an ounce as of 10:05 a.m. in London. The Bloomberg Dollar Spot Index weakened slightly. Silver edged higher, while palladium and platinum rallied.
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