Gold set for third weekly gain as Middle East worries reign

Oct 27  – Gold prices were poised for a third consecutive weekly gain on Friday as the Middle East conflict kept investors drawn towards safety of bullion despite a higher-for-longer U.S. interest rate backdrop.

Spot gold  rose 0.2% to USD 1,987.78 per ounce by 0555 GMT. US. gold futures GCcv1 were steady at USD 1,997.80.

“Gold prices will be a function of the Israel-Hamas conflict for as long as things are at risk of escalating,” said Kyle Rodda, financial market analyst at Capital.com.

Israeli forces executed their biggest ground attack in Gaza in their war with Hamas overnight as anger grew in the Arab world over Israel’s unrelenting airstrikes on the besieged Palestinian territory.

“The yellow metal is commanding a hefty geopolitical premium. It will need continuous feed of concerning geopolitical developments to keep it afloat at current levels,” said Praveen Singh, associate vice-president at BNP Paribas’ Sharekhan.

Spot gold has gained about 9% as investors sought refuge from the potential fallout of the Israel-Hamas war that escalated earlier this month.

But the lingering prospects of US interest rates staying higher for longer have kept prices below the USD 2,000 ceiling last breached in May.

Investor focus is also on the US personal consumption expenditure (PCE) price index due later in the day for cues on what to expect from the U.S. Federal Reserve’s policy meeting next week.

“Gold is holding where it is because of geopolitical risks, with prices diverging from the typical fundamental drivers … if it were a factor of real yields and the dollar, gold would be lower,” Rodda added.

The dollar was set for a weekly gain on Friday, while U.S. Treasury yields edged 0.2% higher after data showed the U.S. economy surged at the fastest pace in nearly two years in the third quarter.

In other metals, spot silver  rose 0.3% to USD 22.87 per ounce, platinum  climbed 0.8% to USD 907.17 and palladium added 0.5% to USD 1,138.59.

(Reporting by Swati Verma in Bengaluru; Editing by Sherry Jacob-Phillips)