Gold prices surged in Asian trading, nearing record highs as investors sought refuge amidst escalating geopolitical tensions between Iran and Israel. However, gains in the yellow metal were tempered by a spike in the dollar, driven by mounting expectations of prolonged higher U.S. interest rates.
Despite this, gold maintained robust gains over the past two weeks, bolstered primarily by heightened demand for safe haven assets.
Spot gold edged up 0.1% to $2,385.35 per ounce, while gold futures expiring in June climbed 0.7% to a record high of $2,401.50 per ounce by 00:17 ET (04:17 GMT). Spot gold had reached a record peak of $2,431.53 per ounce on Friday, shortly before Iran conducted a drone and missile strike on Israel.
Geopolitical tensions between Iran and Israel Drive Safe Haven Demand for Gold
Recent surges in gold prices were largely driven by escalating geopolitical tensions in the Middle East, particularly after Iran’s attack on Israel over the weekend. Reports indicating Israel’s imminent response to the strike intensified concerns of a potential all-out conflict, which could involve other regional powers as well as the U.S. and its allies.
Fearing such a scenario, investors turned to gold, traditionally viewed as a safe haven asset due to its relative price stability, especially during times of global unrest.
Central bank purchases over the past year, particularly in emerging markets, also contributed to gold’s support amidst growing fears of a global economic downturn in 2024.
Spot gold has seen a 15.5% increase in value so far in 2024.
Powell Speech Awaited as Rate Concerns Mount
Investors awaited a speech from Federal Reserve Chair Jerome Powell later on Tuesday for further insights into potential interest rate adjustments this year. This anticipation followed strong inflation and retail sales data, which led traders to largely discount expectations of a rate cut in June.
This perception limited gold’s upside as investors turned to the dollar as a hedge against potential long-term U.S. interest rate increases.
Mixed Performance in Other Precious Metals and Industrial Metals
In contrast, other precious metals displayed mixed performance on Tuesday. Platinum futures dipped 0.3% to $981.30 per ounce, while silver futures climbed 0.6% to $28.880 per ounce.
Among industrial metals, copper prices retreated from 22-month highs on Tuesday, influenced by mixed data from China, the top importer. Three-month copper futures on the London Metal Exchange declined 0.3% to $9,544.50 per ton, while one-month U.S. copper futures slipped 0.6% to $4.3515 per pound.
Despite robust gross domestic product data indicating stronger-than-expected growth in China’s economy for the first quarter, figures for industrial production and retail sales in March hinted at a potential slowdown in momentum. Nonetheless, the prospect of tighter copper markets, prompted by production cuts by several Chinese copper refiners, kept copper prices near their recent highs.
In the aluminum market, prices cooled after reaching 22-month highs due to expectations of tightened supplies following stricter western sanctions against Russia.