The ceasefire agreement mediated by the U.S. and France between Israel and Hezbollah just took effect on the 27th, but this week there were reports of exchanges of fire, and the ceasefire agreement is on the brink of collapse, which could raise safe-haven demand in the market again.
The ceasefire agreement reached between Israel and the Shiite militant group Hezbollah in Lebanon officially took effect on the 27th, but both sides have accused each other of violating the ceasefire agreement this week. The ceasefire agreement, mediated by the U.S. and France, seems to be on the verge of collapse. If hostilities reignite, it could raise safe-haven demand in the market again.
According to reports from AFP and Al Jazeera, Israel conducted airstrikes in southern Lebanon today (3rd), resulting in at least 11 deaths, severely threatening the ceasefire agreement. The Israeli side claimed that the attack was launched to prevent threats after detecting a portable rocket launcher from Hezbollah in the area that could be involved in military activities.
On the same day, Hezbollah fired two shells at Israeli military outposts in the Dove Mountain area controlled by Israel and stated that this was a warning for Israel's repeated violations of the ceasefire agreement. Israeli Prime Minister Netanyahu stated that the Hezbollah attack did not cause casualties but was a serious violation of the ceasefire agreement. He emphasized Israel's determination to maintain the ceasefire agreement but would respond to any violations by Hezbollah.
Fragile ceasefire agreement between Israel and Lebanon on the verge of collapse
Israel and Lebanon only reached a ceasefire agreement last week, which stipulated that the Israeli army would gradually withdraw from southern Lebanon within 60 days and transfer control of the border to the Lebanese army to prevent Hezbollah from rebuilding military strength in the region. Hezbollah would withdraw from its positions in southern Lebanon to the north of the Litani River, and Hezbollah's new leader, Naim Qassem, also pledged on the 30th to cooperate closely with the Lebanese military to implement the terms of the ceasefire agreement.
However, just a few days after the agreement took effect, both sides exchanged fire, and Nabih Berri, the Lebanese Parliament Speaker responsible for mediation, accused Israel of violating the ceasefire agreement in up to 54 ways, including demolishing houses in border villages, sending reconnaissance drones continuously over the airspace, and causing casualties from airstrikes. He called for urgent intervention measures from the U.S. and France against Israel.
This has raised concerns about whether the seemingly fragile ceasefire agreement will collapse. However, Axios reported that both Israel and Lebanon expressed to the White House on Monday that despite the recent border clashes, they remain committed to the ceasefire agreement and hope to maintain it.
Trump's tariff threats strengthen the dollar, weakening gold
Last week, due to the ceasefire agreement between Israel and Lebanon, safe-haven demand cooled, and both gold and Bitcoin prices weakened. However, concerns over the escalation of the Ukraine-Russia war continue to support the demand for safe-haven assets such as gold, with gold prices remaining oscillated above $2600.
According to Reuters, gold spot prices fell on Monday, ending a four-day streak of gains. Market analysis attributed the reason to Trump's statement that BRICS countries attempting to break away from the dollar would face a '100% tariff' consequence, leading to a significant strengthening of the dollar and putting pressure on gold prices.
Last week, Trump also threatened to impose additional tariffs on China, Canada, and Mexico, raising concerns about a potential global trade war. Moreover, the inflation caused by Trump's leadership and the minutes from the Federal Reserve's November FOMC meeting also indicated that officials tend to take a more cautious approach to interest rate cuts, which has raised concerns that U.S. interest rates will remain high for an extended period, further unsettling the metals market.
These adverse factors have led to a 3% drop in gold prices in November, marking the largest monthly decline since September 2023. BMI analysts stated in the report:
"We note that gold faces strong downward risks in 2025 and expect significant volatility in gold prices, as we may see the Federal Reserve take a more cautious approach to interest rate cuts, which is unfavorable for gold."
Source: TradingView
Middle East conflict rekindles safe-haven demand
However, with Israel recently expanding its bombing of the Gaza Strip and the ceasefire agreement with Lebanon facing a crisis of collapse, the flames of war may reignite, and the geopolitical conflicts in the Middle East may bring safe-haven demand back to the market. Assets considered safe havens, such as gold and Bitcoin, may benefit from safe-haven buying.
Peter Grant, Vice President and Senior Metal Strategist at Zaner Metals, analyzed: "Gold prices are supported by ongoing geopolitical uncertainties. He stated that the downside is limited and expects the gold market to oscillate and consolidate by the end of the year."
The overall economy is still shrouded in uncertainty, and investors are awaiting key economic data and insights from the Federal Reserve regarding interest rate trends. This week, the most closely watched events are the release of U.S. non-farm payroll data and speeches by Fed officials, including Chairman Powell.
