Gold & Silver

Gold spikes as investors brace for Iran's response to US strike

Bloomberg Singapore | Updated on January 03, 2020 Published on January 03, 2020

Gold jumped to the highest in almost four months after a US air strike killed one of Iran’s most powerful generals, ratcheting up tensions in West Asia and spurring demand for haven assets.

The strike in Baghdad ordered by President Donald Trump killed Qassem Soleimani, the Iranian general who led the Revolutionary Guard’s Quds force, the US Defence Department said. Iran’s supreme leader, Ayatollah Ali Khamenei, has vowed that severe retaliation awaits those who killed the commander.

Also read: Top Iranian military commander Qassem Soleimani killed in US air strike

Bullion is already building on its stellar 2019 rally as the dollar weakens, and the return of geopolitical concerns to the foreground will further aid prices. Gold clinched its biggest annual gain since 2010 as looser monetary policy, unrest in regions from Chile to Hong Kong and buying sprees from key central banks and exchange-traded funds supported the haven.

“While this may be the knee-jerk reaction we are seeing at present, the likelihood of further reactions cannot be ruled out, which may keep gold supported in the near term,” Jingyi Pan, market strategist at IG Asia Pte in Singapore, said in an email.

Spot bullion rose as much as 1 per cent to $1,543.93 an ounce, the highest since September 5, and traded at $1,541.77 at 2:03 PM (local time). Prices are up 2.1 per cent this week. The futures on the Comex surged as much as 1.2 per cent.

Attitude shift

The rally comes even as US-China trade tensions ebb and US equities post fresh records. Last year’s advance marked a positive shift in investor attitude toward gold, according to RBC Capital Markets, which predicted further gains this year and next.

Goldman Sachs Group Inc, Citigroup Inc and UBS Group AG have said they are looking for $1,600 an ounce.

January is historically golds best month, according to Bloomberg Intelligence. If prices match the average January advance of 2.7 per cent over the past 20 years, they will surpass the six-year high reached in September. The yellow metal will approach $1,600 by February, if it matches the 5.2 per cent average increase of the past five years.

In other precious metals, silver climbed 1.1 per cent, platinum advanced 0.5 per cent and palladium rose 0.2 per cent.

Published on January 03, 2020
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