Freshly cast gold ingot bars sit in the foundry at the JSC Krastsvetmet non-ferrous metals plant in Krasnoyarsk, Russia, on Tuesday, Nov. 5, 2019.
Andrew Rudakov | Bloomberg | Getty Images
Gold surged on Monday to its highest level in more than six years as investors fled riskier assets such as stocks amid rising tensions between Iran and the U.S.
Futures for February delivery were up 1.7% at $1,578.80 per ounce and hit a high of $1,590.90 per ounce. That’s the metal’s highest level since April 2, 2013, when it traded at $1,604.30 per ounce. Gold was also headed for its ninth straight day of gains.
“This is a bullish development, and while stretched, should lead to higher gold prices in the days/week ahead,” said Mark Newton, managing member of Newton Advisors. He added that the precious metal could reach a range between $1,650 and $1,700 per ounce in the near term.
Gold prices have been on a tear over the past two sessions after President Donald Trump authorized the assassination of Qasem Soleimani, a top-ranking Iranian military official, in Baghdad. On Friday, gold rallied 1.6%.
Soleimani’s assassination led Iraq to expel foreign troops from the country while Iran vowed to retaliate against the U.S. The Iranian regime also said Sunday it would not abide by the set by the 2015 nuclear deal.
Stock prices tumbled last week after Soleimani was killed. The S&P 500 and Dow Jones Industrial Average both had their worst trading day in a month on Friday. Wall Street was set to add to those losses on Monday with stock futures pointing to another drop.
“The killing of Soleimani has heightened geopolitical risks as he was a well-known figure in Iran,” wrote Keith Lerner, chief market strategist at SunTrust Private Wealth. “The Iranians may take time to calculate their next move; if they do decide to retaliate, risk assets could come under additional pressure.”
Investors have turned to gold in part because the metal is seen as a hedge against market volatility and economic slowdowns, particularly if they are sparked by geopolitical tensions.
“We found that spikes in geopolitical tensions lead to higher gold prices when they are severe enough to cause currency debasement,” Jeff Currie, head of commodities research at Goldman Sachs, said in a note. “This most often happens during wars or military escalations.”
“Therefore, additional escalation in US-Iranian tensions could further boost gold prices,” he said.
Gold is also used as a hedge against inflation, which could rise if oil prices keep spiking. Crude prices jumped more than 3% on Friday amid worries that the U.S.-Iran conflict could disrupt the global oil supply. On Monday, oil was up about 1% neat $63.70 per barrel.
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