Gold rods to its highest mark since Y 2013 in the US session Monday, as rising tensions in the Middle East drives demand for havens, with Goldman Sachs (NYSE:GS) seeing more room to run.
Palladium, the most precious, extended gains to a fresh record.
Bullion neared 1,600 oz after Tehran said it would no longer abide by any limits on its enrichment of uranium following the killing of General Qassem Soleimani.
President Trump said he’s prepared to strike Iran “in a disproportionate manner” if it retaliates against any US target.
Gold may prove a better bet than Crude Oil amid rising tensions, according to Goldman analysts.
“History shows that under most outcomes gold will likely rally to well beyond current levels,” Goldie analysts said in a note. That’s “consistent with our previous research, which shows that being long gold is a better hedge to such geopolitical risks.”
Spot gold climbed as much as 2.3% to 1,588.13 oz Monday, the highest mark since April 2013, and traded at 1,566.93 at 2:07p in New York.
Prices could reach 1,600 if tensions escalate further, according to analysts including those at UBS Group AG. Futures settled 1.1% higher on the COMEX.
Investors came back from holidays and experienced a 100 higher gold price compared to when they left. Some have chased it in a FOL and safeguard way, while others who already hold gold will probably wait and see.
JPMorgan Chase & Co. analysts expect that an extension of the rally to 1,655 is “highly likely,” whereas a break below 1,531.22 could lead to a setback.
“Markets tend to overreact to geopolitics when trading is thin, as it has been during the post-holiday period, but investors are right to fret about what is happening in the Middle East,” a JPM analysts said in a Monday note to clients.
Bullion is building on the largest annual climb since Y 2010, which was driven by the US-China trade disputes drag on global growth, easier monetary policy across the world’s leading economies and sustained buying from ETFs and central banks.
“Negative real rates in the US and a weaker USD favor stronger precious metal prices in general,” a commodity analyst at UBS Wealth Management. “Thus, we see value in staying long the metal.”
The Fed is unlikely to raise interest rates this year, which will in turn probably keep a cap on USD. The rally in gold and other precious metals has been “so outstanding” that it’s contributing to UDS weakness.
“Gold is now trading as a haven asset and ignoring the former headwinds,” a managing director at RBC Wealth Management, said Monday. “With the Fed on hold, you’ve taken out one of the headwinds, and so gold seems to be the haven of choice to preserve purchasing power, and I think investors will continue to look at gold as a necessary haven.”
Palladium has also benefited from the optimism surrounding havens, as well as its own positive fundamentals. The metal is in a multiyear deficit as demand rises in autocatalysts amid stricter emissions standards.
Spot palladium hit a record 2,032.58 oz Monday.
“Palladium, like gold, has been steadily tracking higher over the last two weeks, and the conflict between the US and Tehran seems to have bolstered this,” said research strategist at Pepperstone Ltd. “Demand for palladium is increasing faster than its supply, so the long-term trend is on the up anyway.”
Silver also rose, advancing to 18.5081 oz, the highest since 25 September
An index of senior gold miners headed toward its highest close since February 2013, led by Newcrest Mining Ltd.’s 3.9% advance. Newmont Corp., the world’s largest gold miner, rose 1.1%.