Gold price may reach 5,800 USD US-Iran tension escalates

According to a bank's assessment, if tensions in the Middle East continue to escalate, gold prices could easily set new historical peaks.

In a precious metals report released on Friday, Bernard Dahdah - a precious metals analyst at Natixis (a French financial - banking investment group) said that after considering previous conflicts, gold prices could increase by about 15% thanks to safe-haven demand returning if the confrontation between the US and Iranian governments escalates.

Most of the price increase will occur in the first few weeks. After that, we expect prices to cool down as the market assesses more clearly the consequences and adjusts. In the context of prices going sideways, we estimate gold could reach 5,500 - 5,800 USD/ounce in the two weeks after an attack begins," he said.

Dahdah noted that since the beginning of the month, when US President Donald Trump increased tough statements aimed at Iran, gold prices have shown strength again. Geopolitical instability pushed prices above 5,000 USD/ounce last week.

However, this precious metal has not been able to maintain its upward momentum above the 5,200 USD/ounce mark, although it still maintains a high support zone. Spot gold price at the time of writing (8:25 AM on February 25 - Vietnam time) was recorded at 5,179.8 USD/ounce.

Although gold still has room to increase in price in the context of instability, Dahdah also warned that safe-haven demand is often volatile and rarely creates a sustainable upward trend.

The increases are usually eliminated as soon as the conflict stabilizes. This period may only last a few days or weeks, even if the conflict lasts longer," he said.

Regarding the scenario if tensions escalate into conflict, Natixis believes that reactionary moves may be cautious and limited in scope. The bank forecasts that potential instability in the Middle East is likely to last for only about a month.

Natixis believes that the approach can focus on high-level goals, while limiting changes to the current operating structure and security apparatus, similar to some previous precedents.

According to Dahdah, this scenario is not the same as intervention models in the past, when the goal often included restructuring the management and security systems.