The ceasefire agreement between Israel and Hezbollah, mediated by the US and France, just took effect on the 27th, but reports of exchanges of fire between Israel and Hezbollah surfaced this week, putting the ceasefire agreement on the brink of collapse and potentially increasing market demand for safe havens.
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 this week. The ceasefire agreement, mediated by the US and France, seems to be on the verge of collapse, and if fighting reignites, market demand for safe havens may increase again.
According to reports from AFP and Al Jazeera, Israel conducted airstrikes in southern Lebanon today (3rd), resulting in at least 11 deaths and severely threatening the ceasefire agreement. The Israeli side claimed it was because Hezbollah was detected in the area with portable rocket launchers possibly involved in military activities, prompting the attack to prevent the threat.
On the same day, Hezbollah fired two shells at Israeli military outposts in the Dov region controlled by Israel, claiming it was a warning for Israel's repeated violations of the ceasefire agreement. Israeli Prime Minister Netanyahu stated that the Hezbollah attack caused no casualties but seriously violated the ceasefire agreement, emphasizing Israel's determination to maintain the ceasefire while responding to any violations by Hezbollah.
Fragile ceasefire agreement between Israel and Lebanon at risk of collapse
Israel and Lebanon only reached a ceasefire agreement last week, which stipulates that the Israeli army will gradually withdraw from southern Lebanon within 60 days and transfer border control to the Lebanese government forces to prevent Hezbollah from rebuilding military strength in the area. Hezbollah will withdraw from its positions in southern Lebanon to north of the Litani River, and Hezbollah's new leader, Naim Qassem, also promised to cooperate closely with the Lebanese military to implement the ceasefire agreement's terms.
However, just a few days after the agreement took effect, exchanges of fire occurred, and Nabih Berri, the Lebanese Parliament Speaker responsible for mediation, today accused Israel of violating the ceasefire agreement up to 54 times, including demolishing houses in border villages, sending reconnaissance drones to continuously cross the airspace, and causing casualties through airstrikes. He called for urgent intervention from the US 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 conflicts, they remain committed to the ceasefire agreement and hope to maintain it.
Trump's tariff war threatens to strengthen the dollar, weakening gold
Last week, due to the Israel-Lebanon ceasefire agreement, safe-haven demand cooled, causing prices of gold and Bitcoin to weaken, but concerns over the escalation of the Ukraine-Russia war continue to support demand for safe-haven assets like gold, keeping gold prices fluctuating above $2600.
According to Reuters, spot gold prices fell on Monday, ending a four-day rising streak. Market analysis attributes this to Trump’s statement that BRICS countries attempting to shake off 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. Additionally, the prolonged inflation caused by Trump's leadership, along with the Federal Reserve's November FOMC meeting minutes indicating that officials tend to adopt a more cautious stance on interest rate cuts, has heightened concerns that US interest rates will remain high for an extended period, further unsettling the metals market.
These adverse factors have led to a 3% decline in gold prices in November, marking the largest monthly drop since September 2023. BMI analysts stated in the report:
“We note that gold faces strong downside risks in 2025 and expect significant volatility in gold prices, as we may see the Federal Reserve adopting a more cautious stance on interest rate cuts, which would be unfavorable for gold.”
Source: TradingView
Middle East conflict reignites 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, potentially bringing back market demand for safe havens. Gold and Bitcoin, seen as safe-haven assets, are expected to be driven by safe-haven buying.
Peter Grant, vice president and senior metal strategist at Zaner Metals, analyzed: “Gold prices are supported by ongoing geopolitical uncertainties. He indicated that there is limited downside potential and expects the gold market to consolidate and fluctuate towards the end of the year.”
Currently, the overall economy is still shrouded in uncertainty, and investors are waiting for key economic data and the Federal Reserve's insights on interest rate trends. This week, the most watched events are the release of US non-farm payroll data and speeches from Fed officials, including Chairman Powell.
