Gold and silver have seen steady gains today following an escalation of the conflict in the Middle East. News that the US and UK launched strikes in Yemen in response to the ongoing attacks in the Red Sea will only raise tensions further, and while the response from gold and silver has been measured, they have been steadily rising in price for over 12 hours.

120124 USD Chart

Gold had seen some losses this week before the latest escalation saw prices rise once more.

Gold and silver had experienced some weakness this week on the back of a stronger dollar. US inflation came in higher than expected while the job market continues to prove resilient, and markets are weighing up whether they have been too quick to price in rate cuts. At the very least, the earliest expectations of cuts in March are looking highly unlikely, and the dollar has benefited as a result.

Gold had fallen as low as $2,013.59 per ounce yesterday, it’s lowest price in a month. Silver slipped below $23 to hit a two-month low of $22.49. Both metals have recovered some of the losses however on news of the escalation. Gold is back at $2,050, while silver has once again pushed past $23.

The Houthis targeted by the US and UK have promised further retaliation to the strikes that will likely result in further disruption to shipping across the Red Sea. Freight has already seen significant price increases and longer shipping times as a result. Oil has also seen some price gains on fears the conflict could impact oil production. Both of these could be somewhat negative for gold and silver, as they will only help keep inflation higher for longer, which will also mean rates staying higher for longer.

It is likely that this is dragging on the gold price, which would normally see stronger gains on the back of such a big escalation in a conflict. The increasingly volatile nature of the world in recent years however does seem to be limiting the immediate reaction we now see from investors. Gold has risen more than 1.7% however in less than 24 hours and remains at a high price historically speaking.

Escalation in the Middle East has been closely watched for since the initial attack in October 2023. Now three months on, the intervention of the US and UK certainly marks the kind of escalation many had feared. It is unclear how much further it could spread, but the action in the Red Sea, and the strikes in Yemen move the conflict outside of Gaza and Israel. A sustained push above $2,100 per ounce would be very bullish for gold and would represent a record close should it be reached before markets close for the weekend later today.