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Market Extra: Gold looks to settle above $2,000, at highest since end of July

Gold futures traded higher for a fourth session in a row on Monday, with prices looking to finish the session above $2,000 an ounce — at their highest since the end of July.

Gold for December delivery GCZ23, +0.52% GC00, +0.52% climbed $7.40, or 0.4%, to $2,005.90 an ounce on Comex. Prices for a most-active contract haven’t settled above $2,000 since July 31, according to Dow Jones Market Data. They’re also poised for the highest finish since that date.

Prices for the precious metal have have been rising “largely due to a fear trade with the eruption of the chaos taking place in Israel,” Adam Koos, president of Libertas Wealth Management Group, told MarketWatch.

“Confirmation can be seen in the fact that interest rates have continued to rise right along with the U.S. dollar, all while inflation has remained relatively muted and directionless,” he said. “Point being, the strength in the yellow metal cannot be attributed to any of the typical drivers.”

Israeli forces advanced to the outskirts of Gaza City, The Wall Street Journal reported Monday.

Against that backdrop, gold has been “supported by a safe-haven bid” and the “potential for a wider Middle East conflict,” said Jim Wyckoff, senior analyst at Kitco.com.

The key question for gold now is will it be able to “break north of $2,000, and then $2,060, rising to new highs?” said Koos.

The answer may come down to “what transpires in the Middle East, but a whole lot more to do with Jay Powell and the Fed,” he said. 

If Federal Reserve Chairman Jerome Powell remains hawkish and considers further rate hikes, “then gold finds itself with a continued headwind amongst its largest ‘trifecta’ of external drivers” — the U.S. dollar, interest rates, and inflation, he said.

Read: Fed likely won’t raise rates this week, and will hope that they’re done

However, if he finally starts getting dovish, then I think we see gold prices exhibit further strength, said Koos. “It’s a big week for the Fed, so it’ll be interesting to see how things go.”

The U.S. central bank will announce its decision on interest rates at the end of its two-day meeting on Wednesday.

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