So-called haven investments including gold and the U.S. dollar rallied on Monday as Israel retaliated following Hamas’s bloody invasion of southern Israel over the weekend.
Many investors were concerned about the potential for escalation and protracted conflict in one of the most politically fraught regions of the world.
Gold futures
GC00,
expiring in December rose 1% to $1,863 per ounce on Comex, while the ICE U.S. Dollar Index
DXY,
a gauge of the currency’s strength against a basket of rivals, rose 0.5% to 106.52, according to FactSet data.
“Gold took the lead as investors flocked to safety,” said Raffi Boyadjian, lead investment analyst at XM, in emailed commentary.
Seeing gold and the U.S. dollar rallying in tandem has been a rare occurrence over the past 18 months, since a stronger dollar has tended to weigh on prices of the yellow metal and other commodities.
Other currency-market havens also rose despite the dollar’s strength, including the Japanese yen
USDJPY,
which was marginally higher, while the Swiss franc
USDCHF,
strengthened against its main rival, the euro.
Trading in U.S. Treasurys was closed for the Columbus Day and Indigenous Peoples Day holiday on Monday.
Instead, investors bid up high-quality European government bonds, including German bund with the yield on the 10-year German bund, seen as the European bond-market benchmark, down about 2 basis points at 2.866% in recent trade.
See: The U.S. stock market is open Monday for Columbus Day and Indigenous Peoples Day
U.S. stocks were likely to open lower on Monday, with S&P 500
ES00,
futures off 22 points, or 0.5%, to 4,319, while Dow futures
YM00,
were down 102 points, or 0.7%, to 15,010 after opening roughly 200 points lower overnight. Nasdaq-100 futures
NQ00,
were also down 0.7%.
Crude oil prices also rallied, with West Texas Intermediate
CL00,
CLX23,
crude futures expiring in October up 4% at $86.21 a barrel. Brent crude futures
BRNZ23,
the international benchmark, were up 4% at $88 a barrel for contracts expiring later this month.
While the U.S. bond market is closed on Monday, analysts said they would be watching the iShares 20 Plus Year Treasury Bond ETF
TLT
for signs of safety flows into U.S. government bonds, which could ultimately bring down bond yields and alleviate some of the pressure on stocks.
Market analysts are now waiting to see whether the conflict between Israel and Hamas spreads. There has been speculation that Hezbollah, seen as another Iranian proxy in the region, could strike at Israel from the north in response to a promised siege of Gaza, Iran helped plan the attack, according to a report in The Wall Street Journal. However, according to a Monday report from the Times of Israel, “the IDF also said there was no evidence yet of Iran’s role.”
Geopolitical analysts including Eurasia Group’s Ian Bremmer have speculated that the attack and Israel’s response could scuttle efforts to normalize relations between Israel and the Kingdom of Saudi Arabia.
Israel has promised a complete siege of the Gaza Strip after Hamas militants invaded southern Israel on Saturday as the seven-day Jewish holiday of Sukkot was ending.
Hamas militants took hostages and killed hundreds of Israelis, while retaliatory Israeli airstrikes in Gaza have already killed hundreds more, according to news reports.
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