Prices of gold jumped in Asian trade close to record highs as tensions between Iran and Israel, amid growing geopolitical uncertainties, raised safe-haven demand. The yellow metal rallied on fears of intensified geopolitical tensions in the Middle East, especially following an Iranian attack on Israel over the weekend. Media reports with respect to an imminent response by Israel only served to add fears over a possible escalation of the conflict in the region.
Such geopolitical instability mostly pushes investors toward safe heavens like gold, which is considered to be a very safe source of investment under uncertain conditions in geopolitics.
Spot gold was 0.1% up at $2,385.35 an ounce. Gold futures for June had earlier hit a fresh record of $2,401.50 an ounce, pointing out a strong appetite for the precious metal from investors in the safe-haven asset. Spot gold had hit a record last week of $2,431.53 an ounce before Iran launched its attack on Israel.
Supportive of the recent rally in gold prices is central bank buying over the last year, particularly from emerging markets, when concern was on the rise that 2024 could see a possible downturn in the global economy. Spot gold traded 15.5% YTD higher with increased consideration by investors for the metal as a refuge from economic uncertainty and market volatility.
The sharp rise in the dollar, however, tamed somewhat the gains in gold and limited the upside for the metal. Data for U.S. inflation and retail sales in April was bullish, strengthening expectations for higher interest rates in the country, and thus spurred traders to buy dollars as an insurance against potential hikes in the interest rates. Markets will focus on a speech later Friday from Federal Reserve Chair Jerome Powell that could clarify the outlook for interest-rate cuts later this year. Powell's speech comes after strong economic data, with traders revising down expectations for a rate cut in June, contributing to the dollar's strength and reining in gold's rise.
While gold stole the spotlight amid geopolitical tensions, other precious metals saw mixed performance. Platinum futures fell 0.3% to $981.30 an ounce, while silver futures added 0.6% to $28.880 an ounce. Meanwhile, copper prices came off from 22-month highs hit on Tuesday with data out of China—the world's biggest consumer of the base metal.
In conclusion, the price rise near record highs brings the value of gold closer to those levels and underscores investors' lingering worries over geopolitical uncertainties and economic risks that drive demand for safe-haven assets in choppy market conditions. And with the Middle East still in suspense, and economic indicators dictating changes in monetary policy expectations, the attention of any investor looking for a safe haven and protection from market vagaries will keep coming back to gold.
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