Gold surged to an unprecedented fresh record high as tensions escalated in the Middle East, igniting a flurry of buying activity. The precious metal shattered the $2,400-an-ounce barrier on Friday morning, soaring by as much as 2.4% to reach $2,429.82. The looming threat of a major missile attack by Iran or its proxies, in retaliation for an Israeli strike on its embassy compound in Syria, has heightened geopolitical uncertainties and spurred gold’s ascent.
With an 18% surge year-to-date, gold has outpaced its 13% advance for the entirety of last year. Despite the absence of clear triggers, the metal’s rally has left observers intrigued, especially amidst uncertainties surrounding the Federal Reserve’s stance on interest-rate cuts. Geopolitical tensions in the Middle East and Ukraine, coupled with economic challenges in China, have bolstered gold’s appeal as a safe-haven asset.
Mohamed A. El-Erian, President of Queens’ College in Cambridge and a Bloomberg Opinion columnist, highlighted gold’s growing appeal as a hedge against geopolitical risks amid US inflation concerns. This sentiment underscores the metal’s role as a reliable store of value during times of uncertainty.
Silver has mirrored gold’s upward trajectory this year, buoyed by increased purchases from central banks, including China’s. Spot gold surged by 2.3% to $2,426.69 an ounce, marking its fourth consecutive weekly gain, while silver rallied to $29.6637 an ounce, reaching its highest level since February 2021.
Despite the bullish sentiment, concerns about overbought conditions loom as both gold and silver approach 14-day relative-strength indexes near 80. A stronger US dollar, indicated by the Bloomberg Dollar Spot Index trading at its highest level since November, poses a potential headwind for commodities priced in the greenback.
Rhona O’Connell, Head of Market Analysis at StoneX Financial Ltd., emphasized geopolitical risk as the driving force behind gold’s surge. With a plethora of local and national elections slated for this year, ongoing tensions in the Middle East fuel uncertainty and bolster demand for safe-haven assets.
The meteoric rise of gold to a fresh record high underscores its role as a barometer of geopolitical tensions and economic uncertainties. As investors seek refuge from market volatility, gold’s allure as a safe-haven asset remains unmatched. However, potential challenges lie ahead, including overbought conditions and the influence of a strengthening US dollar, which could temper the metal’s ascent in the near term.
Source: Bloomberg
