Gold prices approached a new all-time high as escalating tensions in the Middle East drove investors towards the classic safe haven. The spot price of bullion saw an increase of up to 1.6% before slightly retracting, following reports by US officials of Israeli strikes in Iran, hinting at the possibility of an expanded regional conflict. Concurrently, base metals saw a surge, albeit with a reduction in their initial gains later on.
The unrest in the Middle East has triggered market volatility, affecting commodities such as oil, gold, and copper, according to Jia Zheng, a leading trader at Shanghai Dongwu Jiuying Investment Management Co. The demand for gold as a safe investment option has intensified amidst these geopolitical tensions.
Since mid-February, gold has been on a significant upward trajectory, breaking past $2,400 a ton, fueled by anticipations of rate cuts by the US, ongoing purchases by central banks, and robust consumer demand, particularly from China. The geopolitical tensions have further propelled the precious metal's value.
Market participants are bracing for potential Israeli retaliation following Iran's unprecedented missile and drone attack. The situation has been further complicated by warnings from Tehran against any attacks on its nuclear sites. Gold's rally is also technically supported, having surpassed the critical short-term resistance level of $2,400 an ounce, as noted by Kelvin Wong, a senior analyst at Oanda Asia Pacific Pte.
An explosion in Iran's central city of Isfahan heightened concerns over Israeli countermeasures. This incident led to the suspension of flights in various Iranian cities, including Isfahan, Tehran, and Shiraz, as reported by Iran’s Mehr news agency.
Moreover, recent US data has sparked worries that the Federal Reserve might delay rate cuts, a scenario that typically dampens the appeal of gold, which yields no interest. Nevertheless, spot gold was trading higher at $2,391.17 an ounce midday in Singapore, with copper also seeing modest gains. The Bloomberg Dollar Spot Index experienced a slight increase, while silver, palladium, and platinum prices also rose.
