MARKET COMMENTARY – Gold prices rise amid fears of widening Middle East conflict

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By David Brough

LONDON – Gold prices rose in mid-April on fears of a wider Middle East conflict after Iranian drone attacks on Israel on April 13, 2024.

Gold had hit a record peak of USD $2,419.79 per ounce on April 12, due to rising geopolitical tensions before the Iranian drone attack.

Gold prices can rise during periods of intense geopolitical uncertainty. Investors can see the yellow metal as a “safe haven”.

Fears of a widening conflict in the Middle East continued to support gold prices, which rose more than 0.5 percent to USD $ 2,356.39 per ounce on April 15.

Gold prices have hit a series of all-time highs in recent weeks, underpinned by “safe haven” buying and by expectations of U.S. interest rate cuts later this year.

Lately, however, analysts have dialled back expectations for an early U.S. rate cut due to sticky U.S. inflation data. 

Gold has outperformed despite a strong dollar. The precious metal is priced in dollars, so a buoyant dollar makes gold costlier in terms of other currencies, including the pound.

For UK-based gold savers, the present soft pound against the dollar would increase the return in sterling terms on sales of gold.

Many analysts believe gold prices could rise further due to its recent strong upside momentum (a “fear of missing out” by investors), and due to bullion’s appeal as a safe haven.  

Kitco News reported on April 12 that “the clear consensus in the marketplace is that this gold rally is far from over.”

“This resilient strength comes as inflation remains stubbornly high, which could force the U.S. Federal Reserve (central bank) to maintain its aggressive monetary policy longer than expected,” it reported.

Goldman Sachs have raised their gold price forecast for end-2024 to USD $2,700 from USD $2,300.

The pound has softened to around five-month lows against the dollar, underpinned by the persistent U.S. inflationary pressures.

Now some analysts believe that the Bank of England may start cutting interest rates in the summer, possibly before the U.S. Federal Reserve cuts rates. 

The latest UK economic data points to Britain being on course to come out of a shallow recession.

(Disclaimer: any opinions expressed in this article are solely those of the author, and are not intended as investment advice.)

MARKET COMMENTARY – Gold prices rise amid fears of widening Middle East conflict

Picture credit: PureJewels gold jewellery