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Gold extended its rally on Friday as investors fled to the precious metal following Israel’s attack on Iran, re-igniting fears of a broader conflict in the Middle East.
Spot gold gained as much as 1.8% to $3,446.86 per ounce, the highest since its record-setting rally in mid-April. By 10:45 a.m. ET, it had pared some gains, up 1.5% at just under $3,436 an ounce.
Meanwhile, US gold futures added 1.6% to trade at $3,456.10 an ounce in New York.
According to Daniel Pavilonis, senior market strategist at RJO Futures, the Israeli strike on Thursday evening caused “a little bit of geopolitical scare” in the market.
“Prices will stay elevated in the anticipation of what is to come, the retaliation by Iran,” he predicted.
“The risk of Iranian retaliation, including threats to US bases, adds to the uncertainty and supports haven flows,” Charu Chanana, a strategist at Saxo Capital Markets, told Bloomberg.
With the gains, gold is now nearly $60 shy of its all-time high of $3,500.05 an ounce. The yellow metal has rallied more than 30% this year, as investors turned to the safe-haven metal as a hedge against economic uncertainty and geopolitical risks.
Friday’s move higher extended a two-day gain for bullion, as weak US inflation and jobs data fueled bets that the Federal Reserve will lower interest rates later this year.
“With markets already on edge and risk sentiment deteriorating, gold is likely to stay bid as a hedge — not just against conflict risk, but also a possible spillover into inflation and volatility,” Saxo’s Chanana said.
“Gold is probably the best thing that we added to our portfolios in the middle of last year,” Mark Andersen, co-head of global asset allocation at UBS Switzerland AG. “It’s both helping us when we see rising tensions in the Middle East like today, but also weighing against debt fears, inflation fears, etc.”
Goldman Sachs recently reiterated its forecast that structurally strong central bank buying will elevate gold prices to $3,700 by the end of 2025 and $4,000 by mid-2026. Bank of America also sees a path toward $4,000 over the next 12 months.
(With files from Bloomberg and Reuters)