In the wake of escalating tensions in the Middle East, gold prices have remained steadfastly high, underscoring the enduring allure of the precious metal as a safe-haven asset.
On Monday, gold futures for the most-active June contract closed at a record high of $2,383 per ounce, marking a 0.37% increase. According to analysts, this surge in gold prices has been propelled by geopolitical uncertainties, coinciding with soaring levels in equity indices, as highlighted in a note by Citi dated April 15.
The recent escalation of tensions in the Middle East, notably Iran’s launch of over 300 drones and missiles towards Israel, has amplified the demand for safe-haven assets such as gold. While most of the attacks were intercepted by Israel’s Iron Dome air defense system, the threat of further retaliation looms large, potentially fueling a wider conflict and driving renewed investor interest in gold.
Bartosz Sawicki, a market analyst at Conotoxia fintech, emphasized that a significant escalation could not only spur increased gold buying but also trigger a rally in oil prices and strengthen the U.S. dollar.
Gold’s intrinsic value as a hedge against inflation has further contributed to its appeal amidst economic uncertainties, prompting investors to pivot away from riskier assets like equities. The metal reached an all-time intraday high of $2,448.80 per ounce last Friday.
The surge in gold prices, which has seen an over 15% climb year-to-date, can be attributed to various factors including aggressive monetary policies by central banks worldwide, geopolitical tensions, and anticipations of interest rate cuts by the U.S. Federal Reserve.
The inverse relationship between gold prices and interest rates has also played a significant role. With expectations of a delayed rate cut to September and revised projections for two rate reductions instead of three, gold’s attractiveness relative to fixed income assets like bonds has intensified.
Despite these fluctuations, analysts remain bullish on gold’s prospects. Citi’s analysts, led by Aakash Doshi, Citi’s North America head of commodities research, project gold prices to soar to $3,000 per ounce over the next 6-18 months. Additionally, Citi notes a shift in the financial gold “price floor” from around $1,000 to $2,000 per ounce.
Echoing this sentiment, Goldman Sachs has dubbed the gold market as an “unshakeable bull market” and revised its price target upward from $2,300 to $2,700 per ounce by the end of the year.
