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Mideast War Sparks Safe-Haven Buying

Mideast War Sparks Safe-Haven Buying


Investors rushed to gold after the outbreak of war after Palestinian terrorists executed a surprise attack on Israel, brutally murdering hundreds of citizens. Israel formally declared war on the Palestinian terror group Hamas on Sunday, October 8, pledging to retaliate for the massacre. Gold jumped $30 an ounce on the first trading day after the attack, and continued climbing through the week, a strong affirmation of its safe-haven status, as the possibility of a broader conflict put the investment world on edge.

The buying was also fueled by a short squeeze, which could power gold substantially higher. Speculators in the gold futures market had placed a growing number of bearish bets on the gold price in September. The number of short positions in the futures market, known as short interest, jumped above long positions during late September and early October, according to the Commitment of Traders Report from the Commodity Futures Trading Commission. Those shorts were squeezed—pressured to end their bets against gold and buy the precious metal—as the gold price soared in response to the fighting in the Middle East.

The bearish sentiment that had developed in September may very well have marked a bottoming of gold. Whenever a net short position has developed in gold futures during the past eight years—as occurred in early October—the gold market has bottomed out, according to the highly-regarded financial analyst Fred Hickey, editor of The High-Tech Strategist newsletter, who is predicting an extended rally for the precious metal.

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