Gold Prices Rise as Geopolitical Tensions Boost Demand
By Sherin Elizabeth Varghese
(Reuters) – Gold prices ticked up on Tuesday, not too far away from a record high hit last week, as concerns about rising geopolitical tensions between Iran and Israel propped up demand for the safe-haven metal.
Spot gold was up 0.2% at $2,387.11 per ounce, as of 0355 GMT, after hitting an all-time high of $2,431.29 on Friday. U.S. gold futures rose 0.9% at $2,403.90.
Multiple Factors Supporting Gold Rally
Gold has got another leg of support from the latest round of Middle East headlines, but it was gaining even before that with central bank purchases and rising inflation expectations also supporting the rally – meaning that gold is behaving like an inflationary hedge once more, City Index senior analyst Matt Simpson said.
Additional insight: Gold has always been viewed as a safe-haven asset during times of uncertainty and geopolitical turmoil. The ongoing tensions between Iran and Israel have only added to the appeal of gold as a store of value for investors seeking to hedge against potential risks in the market.
“The fact we saw an intraday break above $2400 quickly reverse suggests traders are keen to book profits, which in turn suggests we may be about to experience some sort of a shakeout at these highs.”
Gold rose 1.6% in the previous session despite data showing U.S. retail sales increased more than expected in March.
Decoupling from U.S. Rates and Dollar
Data out of U.S. has stirred questions on the prospects of rate cuts, with the market now betting on fewer than two quarter-point cuts by the year-end, from three cuts about a month ago. [FEDWATCH]
“The bullion complex has de-coupled from U.S. rates and the U.S. dollar, suggesting robust physical consumption drivers (eg, India/China imports, bar/coin), alt-fiat demand, geopolitical hedging, and central bank buying are supporting the market,” Citi wrote in a note. [USD/][US/]
Additional insight: The shift in focus away from U.S. rates and the dollar highlights the diverse drivers behind the current gold rally. Factors such as physical consumption in key markets like India and China, alternative fiat currency demand, geopolitical hedging, and central bank purchases have all contributed to the sustained strength in the gold market.
Citi projected gold prices to trade at $3,000 per ounce over the next 6-18 months.
Other Precious Metals Performance
Spot silver fell 0.3% to $28.80 per ounce, platinum rose 0.4% at $966.49 and palladium lost 1% to $1,025.43.
(Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Rashmi Aich and Mrigank Dhaniwala)
