Gold prices rose sharply as conflicts broke out in the Middle East, shaking global markets, causing investors to flock to safe haven assets.
This precious metal increased by more than 2% to around $5,390/ounce in the first trading session of the day, continuing the increase of more than 3% of the previous week as US troops strengthened their presence in the area. Conflict spread in the weekend after the US and Israel launched attacks on Iran, and Tehran responded with a series of missiles targeting many targets in many countries. Iran's Supreme Leader Ayatollah Ali Khamenei was killed on the first day of the airstrikes.
Widespread geopolitical tensions along with US President Donald Trump disrupting international relations are key factors driving the prolonged upward momentum of gold prices. This trend is also supported by strong buying activity by central banks and the shift of investors away from government bonds and currency. Since the beginning of the year, gold prices have increased by about 25%, despite a sharp correction from a historic peak of over 5,595 USD/ounce at the end of January.
In February, gold prices recorded the seventh consecutive month of increase, the longest increase since 1973. Even before the conflict with Iran broke out, President Trump pursued an increasingly tough foreign policy. The US military arrested the then Venezuelan President Nicolás Maduro in January, and the US administration also issued statements threatening to annex Greenland.
According to Mr. Ahmad Assiri, strategist at Pepperstone Group Ltd., the increase in gold in the first session of the week is "an early sign that investors are looking for safe haven assets amid escalating regional instability.
The US and Israel launched airstrikes across Iran on Saturday, calling on the Iranian people to stand up against the Islamic regime. Tehran's counter-attacks hit targets in Israel, as well as US bases and locations in many countries including Qatar, the United Arab Emirates, Kuwait and Bahrain. Oil prices rose the most in four years, as the near-blockade of the Strait of Hormuz pushed the global oil market into chaos, while the USD also appreciated.
Precious metals, oil and commodities are all rising despite the recovery of the USD, even though they are valued in USD" - Mr. Hong Hao, Investment Director of Lotus Asset Management Ltd., commented - "This shows that these tangible assets are truly hard currency in the current special period". The Bloomberg Dollar Spot index, a measure of the strength of the USD, rose 0.4% in the first session of Monday.
As of 7:40 am Singapore time, spot gold prices increased by 1.9% to 5.346.71 USD/ounce. Silver prices increased by 2.4% to 96.04 USD/ounce. Platinum and palladium also simultaneously went up.
