Gold surged to a one-month high on Monday, extending its rally from last week, as the escalating war in the Middle East rattled markets and drove investors to safe-haven assets.
Spot gold rose as much as 2.9% to more than $5,400 an ounce — its highest since the late January selloff — before paring some gains as the US markets opened. Meanwhile, prices of other precious metals all fell, with silver down almost 5% to below $90 an ounce.
Gold’s rally has been fueled by the build-up of geopolitical tensions in the Middle East, which reached a breaking point on Saturday when the US and Israel launched an attack on Iran, killing the Islamic Republic’s supreme leader Ali Khamenei.
Since then, Tehran has responded with waves of missiles at targets in multiple countries in the region. These include the United Arab Emirates — a key supplier of bullion to buyers in China and India and a conduit for shipments from London, the world’s dominant spot trading hub. The country partially closed its airspace and suspended flights in Dubai following the attacks, temporarily halting the flow of metal.
According to Bloomberg, traders are now rushing to reroute consignments that had been scheduled to transit through Dubai en route to their final destination. While the disruptions are only temporary, a longer term freeze on flights from the UAE could pose a more serious challenge to the availability of metal for traders across the Asian markets.
“Right now, the market is attempting to figure out whether these attacks are going to be followed up over the next several weeks,” David Meger, director of metals trading at High Ridge Futures, told Reuters. “I think it’s that uncertainty that is more than likely to support prices.”
Bullion, long regarded as a safe asset in times of uncertainty, has notched multiple record highs this year and climbed nearly 25% over the first two months amid US President Donald Trump’s upheaval of international relations and trade.
Gold hedge
“Gold is set to benefit from geopolitical instability, less risk appetite and inflation concerns amid skyrocketing energy costs,” analysts at TD Securities wrote in a Sunday note. Speculators, who have been pulling back from the long gold trade in recent weeks, “could see the developments in the Middle East as an opportunity to get back in,” TD said.
Much of the premium associated with ongoing geopolitical tensions is already priced in for oil, Manish Kabra, head of US equity strategy at Societe Generale, said on Monday. “Gold remains our most preferred hedge — a disciplined diversifier that tends to extend its performance during oil shock.”
Analysts at SP Angel also noted that rising geopolitical fragmentation has prompted BRIC central banks to reduce their exposure to dollar‑denominated assets in favour of gold, adding that they expect this theme to continue.
Before missiles were fired across the Middle East, the major banks had already been bullish on gold. With uncertainty surrounding US trade policy, Bank of America is expecting prices to reach $6,000 an ounce over the next 12 months. JPMorgan recently raised their long-term gold price forecast to $4,500 per ounce, while keeping the year-end target of $6,300 intact.
(With files from Bloomberg and Reuters)
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Gold surged to a one-month high on Monday, extending its rally from last week, as the escalating war in the Middle East rattled markets and drove investors to safe-haven assets.
Spot gold rose as much as 2.9% to more than $5,400 an ounce — its highest since the late January selloff — before paring some gains as the US markets opened. Meanwhile, prices of other precious metals all fell, with silver down almost 5% to below $90 an ounce.
Gold’s rally has been fueled by the build-up of geopolitical tensions in the Middle East, which reached a breaking point on Saturday when the US and Israel launched an attack on Iran, killing the Islamic Republic’s supreme leader Ali Khamenei.
Since then, Tehran has responded with waves of missiles at targets in multiple countries in the region. These include the United Arab Emirates — a key supplier of bullion to buyers in China and India and a conduit for shipments from London, the world’s dominant spot trading hub. The country partially closed its airspace and suspended flights in Dubai following the attacks, temporarily halting the flow of metal.
According to Bloomberg, traders are now rushing to reroute consignments that had been scheduled to transit through Dubai en route to their final destination. While the disruptions are only temporary, a longer term freeze on flights from the UAE could pose a more serious challenge to the availability of metal for traders across the Asian markets.
“Right now, the market is attempting to figure out whether these attacks are going to be followed up over the next several weeks,” David Meger, director of metals trading at High Ridge Futures, told Reuters. “I think it’s that uncertainty that is more than likely to support prices.”
Bullion, long regarded as a safe asset in times of uncertainty, has notched multiple record highs this year and climbed nearly 25% over the first two months amid US President Donald Trump’s upheaval of international relations and trade.
Gold hedge
“Gold is set to benefit from geopolitical instability, less risk appetite and inflation concerns amid skyrocketing energy costs,” analysts at TD Securities wrote in a Sunday note. Speculators, who have been pulling back from the long gold trade in recent weeks, “could see the developments in the Middle East as an opportunity to get back in,” TD said.
Much of the premium associated with ongoing geopolitical tensions is already priced in for oil, Manish Kabra, head of US equity strategy at Societe Generale, said on Monday. “Gold remains our most preferred hedge — a disciplined diversifier that tends to extend its performance during oil shock.”
Analysts at SP Angel also noted that rising geopolitical fragmentation has prompted BRIC central banks to reduce their exposure to dollar‑denominated assets in favour of gold, adding that they expect this theme to continue.
Before missiles were fired across the Middle East, the major banks had already been bullish on gold. With uncertainty surrounding US trade policy, Bank of America is expecting prices to reach $6,000 an ounce over the next 12 months. JPMorgan recently raised their long-term gold price forecast to $4,500 per ounce, while keeping the year-end target of $6,300 intact.
(With files from Bloomberg and Reuters)