Israel-Hamas conflict drives price of gold to a new high
The Israel-Hamas conflict might have driven the price of gold to an all-time high but is it still a safe investment and should investors continue to invest in it?
With no resolution to the war in sight and the price of gold setting historical records, investors have understandably turned to the precious metal to diversify their investments. Gold, after all, can preserve or increase the value of invested money with relatively low volatility, unlike bonds, stocks or cryptocurrencies.
Many countries worldwide hold significant amounts of gold as reserves. It serves as a buffer against currency devaluation. Gold investment comes in various forms, including gold bars, gold funds, gold stocks or investing in gold futures.
Over the past 5 years, the price has steadily increased, especially during crises or significant risk factors.
In 2019, before Covid-19 hit, the gold spot price in New York reached its lowest point at US$1,266.27 per ounce. At the same time, the price of gold bars in Thailand was around 19,150 baht per baht-weight. The highest point during that year was $1,556.94 per ounce in New York, corresponding to approximately 22,350 baht per baht-weight in Thailand.
In 2020, as the pandemic spread, the gold spot price rose and reached its peak at $2,075 per ounce in New York, approximately 30,300 baht per baht-weight in Thailand.
In 2021, the price adjusted downwards, reaching its lowest point at $1,676 per ounce in New York, equivalent to 24,400 baht per baht-weight in Thailand. The highest point during that year was $1,950 per ounce in New York, corresponding to approximately 28,950 baht per baht-weight in Thailand.
In 2022, the gold price surged again, reaching its peak at $2,070 per ounce in New York, approximately 31,700 baht per baht-weight in Thailand.
It seemed to stabilise in 2023 until the Israel-Hamas conflict escalated, causing the gold price to skyrocket to a new high of $2,078.46 per ounce in New York, equivalent to around 34,250 baht per baht-weight in Thailand.
As for the future trend of gold prices, gold experts have different opinions. If the conflict remains limited to Israel and Hamas, it is expected that gold prices may touch $2,000 per ounce. However, if the conflict expands, involving Lebanon and Syria, the prices might reach $2,020-$2,050 per ounce. In the most extreme scenario, a war between Israel and Iran, which is less likely but possible, could push oil prices to $150 per barrel and gold prices might hit an all-time high, says GT Gold Bullion managing director Vorachai Tungsithpakdi.
In the domestic market, the price of gold has consistently reached all-time highs due to the Israel-Hamas conflict. On October 20, the export price of gold by the Gold Traders Association surged to 34,250 baht. Although the global gold market has not reached an all-time high yet, the price is expected to rise to 34,300 baht or higher, prompting some investors to take profits, according to major gold trader Hua Seng Heng’s CEO Thanarat Pasawong.
Considering the uncertainty in the global geopolitical situation, investors need to analyse information and closely monitor the situation. Even though gold is an asset that helps diversify risks and is closely associated with various crises, if the conflict resolution is delayed, the opportunities in gold might turn into a new crisis for investors who cannot adapt quickly enough.
