Gold prices experienced a significant surge, with bullion climbing as much as 1.2% to reach $2,400.67, while silver reached its highest level since February 2021. The escalation of tensions between Israel and Iran has added momentum to the precious metals market, as Israel reportedly prepares for a potential assault from Iran within the next two days in retaliation for an attack on its diplomatic compound in Syria last week, as reported by the Wall Street Journal, citing insider sources.
Investors are increasingly turning to gold as a hedge against geopolitical risk, favoring it over government bonds amidst concerns about inflation in the United States. Mohamed A. El-Erian, President of Queens’ College in Cambridge and a Bloomberg Opinion columnist, emphasized this sentiment, noting that gold is perceived as a safer bet amid geopolitical uncertainties.
The rise in gold prices this year, accompanied by a surge in silver, has been fueled by heightened demand from central banks, including China, which have increased their purchases of the precious metals. Geopolitical tensions in the Middle East and Ukraine have further bolstered the appeal of gold and silver as safe-haven assets.
Meanwhile, investors are closely monitoring the possibility of rate cuts from the Federal Reserve in 2024. However, the outlook has been clouded by recent strong inflation figures from the US, which have raised doubts about the extent of potential monetary policy easing.
As of 9:43 a.m. in London, spot gold was trading 1% higher at $2,396.11 per ounce, marking its fourth consecutive weekly gain, while silver rallied to $29.2295 per ounce. Despite the bullish momentum, both metals’ 14-day relative-strength indexes indicate potential overbought conditions, suggesting a possible pause in their upward trajectory.
Additionally, platinum and palladium saw gains, despite the Bloomberg Dollar Spot Index trading near its highest level since November. A stronger US dollar typically acts as a headwind for commodity prices denominated in the greenback, potentially impacting demand from overseas buyers.
