Gold prices surged over 1% on Tuesday, driven by increased demand for safe-haven assets as geopolitical tensions in the Middle East sharply escalated. The precious metal rose as high as $2,673 per ounce, before pulling back slightly to $2,662, shrugging off the broader strength of the U.S. Dollar. The rally was fueled by reports of Iran launching nearly two hundred missiles in response to Israel’s attack on Hezbollah, igniting fears of a larger regional conflict.

Risk aversion dominated market sentiment, as investor focus shifted away from positive U.S. economic data and instead zeroed in on the rapidly developing conflict. Reports indicated that Iran could soon fire an additional 240-250 missiles at Israel, while Israel, for its part, stated its air force would continue to strike targets in Lebanon. Heightening the stakes, U.S. National Security Adviser Jake Sullivan warned of “severe consequences” for the attack, underscoring the potential for broader international involvement.

The surge in Gold prices underscores the safe-haven appeal of the metal amid growing geopolitical risks. Investors are seeking refuge from uncertainty, even as the U.S. Dollar Index (DXY) rose 0.43% to 101.19, traditionally a factor that weighs on Gold’s attractiveness. Instead, the ongoing tensions have overridden typical market dynamics, with the precious metal extending gains despite Dollar strength.

Jim Wyckoff, a Kitco Analyst, pointed out the potential for further gains, suggesting that Gold prices could reach new record highs if the conflict intensifies. “It’s very likely gold prices will hit new record highs if Iran strikes Israel. Silver prices would also likely hit new for-the-move highs,” he noted, reflecting the widespread market anxiety and anticipation of prolonged conflict.

Tuesday’s gains saw Gold print a new weekly high, but technical traders are now watching the September 30 high of $2,665. A daily close below this level could signal the potential for a pullback, particularly if there are signs of easing tensions in the Middle East. However, with uncertainty swirling and the situation unfolding rapidly, the safe-haven bid remains strong.

Despite a backdrop of better-than-expected U.S. jobs data and stable manufacturing activity according to the Institute for Supply Management (ISM), the overarching narrative in the financial markets is one of caution. As the geopolitical situation evolves, the appetite for risk is likely to stay tempered, keeping assets like Gold in high demand. For now, safe-haven flows continue to drive the metal higher, with market participants bracing for further developments in the conflict.