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Gold Creeps Higher, Awaits Next Leg in U.S.-Iran Conflict

Published 01/07/2020, 02:43 PM
Updated 01/07/2020, 02:44 PM
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Investing.com – Just as it raged over the last two days, the U.S.-Iran conflict has somewhat cooled. But gold prices creeped up again Tuesday as safe-haven investors continued to build positions in the yellow metal amid suspense over Tehran’s next move against Washington.

Gold futures for February delivery on New York’s COMEX settled up $5.50, or 0.4%, at $1,574.30 per ounce. It hit 1,588.65 earlier, its highest level since April 2013, with some analysts saying the market seems set on a near-term high of $1,600.

Spot gold, which tracks live trades in bullion, was up $4.04, or 0.3%, at $1,569.90 by 2:22 PM ET (20:22 GMT). On Monday, the bullion benchmark hit $1,583.70,

Gold prices have surged nearly $20 an ounce since the U.S. airstrike on Friday that killed Qassem Soleimani, the commander of Iran’s Revolutionary Guards’ Quds force, near Baghdad airport.

“After a brief focus on the U.S./Iran flare, risk sentiment has started to recover,” TD Securities said in a note. “That reflects the hopes that policymakers will avoid a military conflict.”

But the situation remains fluid, “and like most geopolitical flare-ups, the impact serves to disrupt markets in the context of positioning and valuation,” the note added.

Eric Scoles, precious metals strategist at RJO Futures in Chicago, concurred, saying gold “has a clear bullish tilt, but the potential for volatility is strong.”

Besides the U.S.-Iran standoff, investors were also on the lookout for next week’s tentative signing of the U.S.-China phase one deal “which could put gold prices under pressure,” Scoles said.

Underscoring the uncertainty, stocks on Wall Street see-sawed as investors tried to gauge the next move on the crisis.

But with Iran still mired with internal troubles after a stampede at Soleimani’s funeral that killed dozens of people, and leaders of the Islamic republic saying they would avenge his death at the time of their choosing, global markets have tried to move on.

A rash of tensions had put the Middle East and the world on the edge right after Soleimani's killing, sending gold prices to 6-1/2 year highs.

Tehran and Washington exchanged strike threats, with Iran’s Supreme Leader Ayatollah Ali Khamenei vowing “harsh revenge” while U.S. President Donald Trump said he had identified 52 targets in Iran, including sites of cultural prominence, in a plan for a counter attack that may be “disproportionate.” The U.S. Defense Department later downplayed the idea that the U.S. would hit non-military targets.

Iran has also said it was abandoning limits to uranium enrichment, a step required for making nuclear weapons. Iraq’s parliament, meanwhile, voted to expel U.S. forces from the country, prompting Trump to threaten Baghdad with sanctions.

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