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Gold Climbs as Middle East War Drives Demand for Safer Assets - BLOOMBERG
BY Yihui Xie, Preeti Soni and Jack Ryan
(Bloomberg) -- Gold rose to the highest in a month, as an escalating war in the Middle East rattled markets and drove investors to seek safety in precious metals.
Spot gold climbed as much as 2.7% to top $5,400 an ounce, building on a gain of more than 3% last week. The conflict spread over the weekend after the US and Israel attacked Iran — killing the Islamic Republic’s supreme leader, Ayatollah Ali Khamenei — and Tehran responded with waves of missiles at targets in multiple countries. Silver and palladium also rose.
Wider geopolitical tensions and Donald Trump’s upheaval of international relations and trade have underpinned a long-running rally for gold, which has also been supported by elevated central-bank buying and investor fears of inflation and currency debasement. The risk-off mood on Monday sent global stocks tumbling, and US Treasuries also fell on concerns over the impact of higher oil prices and rising government spending.
“Gold is set to benefit from geopolitical instability, less risk appetite and inflation concerns amid skyrocketing energy costs,” analysts at TD Securities wrote in a Sunday note. Speculators, who have been pulling back from the long gold trade in recent weeks “could see the developments in the Middle East as an opportunity to get back in,” TD said.
Gold has gained about a quarter so far this year, despite an abrupt pullback from a record high above $5,595 an ounce at the end of January.
Even ahead of the war with Iran, Trump had adopted an increasingly aggressive foreign policy. US troops seized Venezuela’s then-president Nicolás Maduro in January and the administration made threats to annex Greenland. With Washington amassing its biggest military deployment in the Middle East since the Iraq War in 2003, bullion posted its seventh consecutive monthly gain in February — the longest streak since 1973.
On Saturday, the US and Israel launched strikes across Iran, while calling on the population to rise up against the Islamic regime. Tehran’s retaliatory barrage hit targets in Israel, as well as American bases and sites in countries including Qatar, the United Arab Emirates, Kuwait and Bahrain.
Prices for tokenized gold jumped over the weekend as tensions spiked, giving an early indication of investor reaction before markets opened on Monday. Tether Holdings SA’s XAUT and Paxos Inc.’s PAXG, two of the most popular gold-backed tokens, both saw spikes in trading volumes on Saturday.
