Gold Prices Top $2,000 Intraday For The First Time Since Early August

Gold prices climbed above $2,000 an ounce on Friday to trade at their highest since early August, as the Israel-Hamas war raised worries about the potential spread of violence in the Middle East, leading investors to seek safety in the precious metal.

In Friday dealings, December gold (GC00) (GCZ23) rose $20.60, or 1%, to $2,000.90 an ounce on Comex, with the most-active contract trading up more than 3% for the week. Prices haven't traded above $2,000 on an intraday basis since Aug. 1 and haven't settled above that level since July 31, according to Dow Jones Market Data.

"Gold has been strengthened primarily by safe-haven flows in the last two weeks amid the geopolitical tensions in the Middle East," Fawad Razaqzada, market analyst at City Index and FOREX.com, in a market commentary.

"Slightly dovish" comments from U.S. Federal Reserve Chairman Jerome Powell on Thursday have also weighed on the U.S. dollar slightly, further underpinning the metals and causing bond yields to fall back, he said. Lower bond yields and a weakening dollar can make commodities priced in the U.S. currency more attractive to buyers, compared against other assets.

On Thursday, Powell told the Economic Club of New York that inflation is still too high and "a few months of good data" are only the beginning of what is needed to bring inflation back to 2%. He also said the Fed was "attentive" to tighter financial conditions caused by the recent run-up in longer-term bond yields.

Questions remain over the direction of bond yields, however, said Razaqzada. "It is too early to call the top for yields. If they simply consolidate around the current levels, this would still represent a big opportunity cost for holding onto assets that don't pay any interest or dividends like gold."

The precious metal also "could go tumbling lower again in the event of de-escalation in the Middle East situation," he said, adding that "a potential trigger for this reversal might be a potential ceasefire between Israel and Hamas."

So, "it wouldn't take much to push gold back down but for now, price action is telling us that there is strong bullish momentum behind the gold rally," said Razaqzada. "As traders, we must respect that and await a key reversal pattern before potentially looking for bearish trades."