Middle East tensions escalate, safe-haven gold buying surges, prices hit 2-week high

Sudden Conflict Triggers Market Panic

On July 29, a major geopolitical event hit the Middle East: Houthi forces announced large-scale drone strikes on Saudi Aramco oil facilities, claiming to have hit two storage tanks. News of the attack sent international crude prices soaring over 5%, with Brent crude back above $85/barrel. Meanwhile, investors rushed into safe-haven assets, with spot gold jumping straight up in early Asian trade, hitting $2,785/ounce—the highest since July 14. Silver also rose, breaking through the $39.5 mark.

Safe-Haven Sentiment Dominates Markets

Xikang Finance analysts noted that the conflict comes at a critical juncture in the fragile Middle East peace process. Previously, ceasefire talks between Saudi Arabia and the Houthis had progressed for months but recently stalled over control of Yemeni ports. This attack directly threatens global energy supply security, with markets fearing broader military escalation. Funds quickly fled risk assets; Asia-Pacific stocks generally fell over 1%, while the U.S. dollar index edged lower, further boosting dollar-denominated gold.

Key Technical Levels Broken

Technically, gold had oscillated in the $2,720–2,760 range for nearly two weeks, with bulls and bears locked. This morning's breakout above the previous resistance at $2,765, accompanied by strong volume, significantly strengthened bullish momentum. The daily MACD shows a golden cross; RSI near 65 is not yet overbought, suggesting room for further upside. The next key resistance sits at the $2,800 round number. If gold stays above $2,760, it may challenge that level. Support-wise, $2,730 becomes the new near-term floor.

Divergent Institutional Views

Major banks have differing outlooks. Goldman Sachs raised its 3-month gold target to $2,900, citing solid support from geopolitical risks and ongoing central bank buying. Morgan Stanley is more cautious, noting that if Middle East tensions ease quickly, the risk premium could fade rapidly, advising investors to manage positions. Xikang Finance believes gold will remain driven by news in the short term. Investors should watch tonight's U.S. durable goods orders; if weak, it could reinforce the safe-haven narrative.

Physical Gold Demand Heats Up

Beyond futures, demand for physical gold bars and coins in Asia also surged. Data from the Singapore Bullion Market Association showed trading volume in the first hour up 40% from the five-day average. Some retail gold shops saw queues; gold bar premiums widened from the usual 0.5% to 1.2%. Analysts warn that while gold offers safe-haven qualities, short-term volatility is high. Retail investors should adopt a phased buying strategy to avoid chasing highs.

Key Events Ahead

Markets now await Saudi Arabia's response and the outcome of the UN Security Council emergency meeting. Additionally, the Federal Reserve's interest rate decision at 2:00 a.m. Beijing time Thursday cannot be ignored. Although the market expects no change this time, any hint of a September rate cut could resonate with safe-haven sentiment, pushing gold higher. On silver, its industrial nature limits safe-haven appeal, but if oil stays elevated, silver—as a key energy transition metal—may benefit from inflation expectations.

Overall, the gold market is caught in a complex mix of geopolitical risk and macro expectations. Xikang Finance will track the latest developments 24/7, providing timely, professional precious metals analysis for investors.