In the context of the escalating Russia-Ukraine war and the intensifying Middle East conflict, gold has increasingly become an attractive safe-haven asset. Today, international gold prices surpassed the $2,660 mark, setting a new historical high, with an increase of nearly 30% so far this year. Meanwhile, Bitcoin has also reached a new high in recent months, but how long will the war-induced safe-haven effect last?
(Background Summary: Gold surges 80 dollars to set a new historical high! Will the Fed’s interest rate cuts push it beyond $3,000? When will it be Bitcoin’s turn?)
(Additional Context: Gold reaches a new high! Benefiting from European interest rate cuts and expectations of Fed easing… What about Bitcoin?)
Tensions in the Middle East have sharply escalated recently, with Israel and Lebanon nearing the brink of full-scale war. Following a series of explosions involving Lebanese beacons and intercoms, Israel has launched extensive airstrikes on targets within Lebanon this week, resulting in numerous casualties. Hezbollah has retaliated with rocket attacks on northern Israel, and there is a possibility that Israel may initiate a ground invasion of Lebanon, further escalating the conflict.
At the same time, the Russia-Ukraine war has intensified, with Ukraine breaching the border and entering Russia’s western Kursk region last month. Fierce fighting continues along the eastern front, and in recent months, Ukraine has been seeking to persuade Western allies such as the U.S. and the U.K. to relax restrictions on the use of long-range missiles to strike targets within Russia.
International gold prices hit a new high
Amid increasing geopolitical conflicts, international spot gold prices have continued to rise, reaching $2,660.74 per ounce today, up 1.3%, again setting a historical record. Since the beginning of the year, the increase has approached 30%.
Gold spot price trend chart. Source: Tradingview
Bitcoin, often referred to as “digital gold,” has also performed well recently, rising 12% in the past two weeks. This morning (25th), around 7 a.m., it peaked at $64,698, marking its highest level since August 26 and seemingly poised to challenge the $65,000 threshold.
Extended Reading:
Bitcoin breaks through $64,500; what are the key resistance levels? U.S. stocks rise collectively as Dow and S&P set new highs.
UBS’s Chief Investment Office for Global Wealth Management recently released a report indicating that gold is expected to achieve its best annual performance in 14 years. Three main reasons support the rising prices of gold and other precious metals, including further easing from the Fed, heightened tensions in the Middle East and Russia-Ukraine, and investment demand from central banks, all contributing to the rise in international gold prices.
Will the war-induced safe-haven effect last?
However, the recent safe-haven effect from the war may face variables. Although conflicts in the Middle East and Ukraine may continue to escalate, there is also the possibility of de-escalation or nearing an end.
According to a Reuters report, Israeli airstrikes on Lebanon have resulted in 569 deaths and 1,835 injuries. The Lebanese Foreign Minister stated on Tuesday that the U.S. is the only country capable of genuinely influencing the situation in the Middle East and Lebanon, asserting that only the U.S. can help end the conflict.
U.S. President Joe Biden called for calm among all parties during his speech at the United Nations General Assembly on Tuesday, emphasizing that full-scale war is not in anyone’s interest, and that even amid escalating tensions, a diplomatic solution may still be achievable.
At the same time, Ukrainian President Volodymyr Zelensky, who is visiting the U.S. for the UN General Assembly, stated in an interview with ABC on the 23rd that the war with Russia is “closer to ending than we think,” expressing confidence in the situation and actively seeking further assistance from the West.
Zelensky is expected to present a “Victory Plan” to President Biden on the 26th and has been reported to be meeting separately with Vice President Kamala Harris and Republican presidential candidate Donald Trump. He revealed that the goal of this plan is to strengthen Ukraine and compel Russian President Vladimir Putin to negotiate under fairer conditions.
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