​Improved Risk Sentiment in Israel-Palestine Conflict Reduces Demand for Gold, Price Likely to Remain below $2,000

Gold prices have rebounded from recent losses due to improved risk sentiment. Escalation of the Middle East conflict may boost demand for the safe-haven asset, gold. Positive news from China and a decline in US Treasury yields are shifting market sentiment towards optimism, weakening the US dollar.

During Tuesday's Asian session, gold prices hovered around $1,980, receiving upward support from falling US Treasury yields and a dollar adjustment.

The US dollar extended its four-day decline, hovering near 105.50. The 10-year US Treasury yield dropped from its peak at 5.02% to the current 4.84%. If US bond yields continue to decline, the US dollar may remain weak, potentially supporting gold prices to reach the $2,000 level.

Geopolitical tensions between Israel and Hamas typically drive demand for safe-haven assets like gold. However, diplomatic efforts to ease tensions in the Gaza Strip between Israel and Hamas have reduced market risk aversion, posing a challenge to gold prices amid the current risk-on sentiment. Nevertheless, there is a growing domestic demand within Israel to reassess the potential scope of a ground invasion in Gaza, which is foreseeable in the short term.

China's plan to authorize the issuance of slightly over 1 trillion yuan in sovereign debt could improve market sentiment upon its disclosure. Additionally, positive discussions between China and the US during the first meeting of the economic working group contribute to improved market sentiment. This continues to weigh on the safe-haven US dollar, resulting in an increase in gold prices.

Market observers are focusing on data releases. On Tuesday, the US will announce the S&P Global Purchasing Managers' Index, followed by Q3 GDP data on Thursday. Core Personal Consumption Expenditures Price Index will also be released by the US on Friday.