Gold surged to the highest level in more than six years as fast-rising tensions in the Middle East stoked demand for haven assets, with Goldman Sachs Group Inc. saying that bullion offered a more effective hedge than oil to the crisis. Palladium extended gains to an all-time high.
Bullion neared $1,600 an ounce as Tehran said it would no longer abide by any limits on its enrichment of uranium following the killing of General Qassem Soleimani. In addition, President Donald Trump said he was prepared to strike Iran “in a disproportionate manner” if it retaliates against any U.S. target.
Gold “has entered 2020 with strong momentum,” Gavin Wendt, senior resource analyst at MineLife Pty in Sydney, said in an email. “When you factor in ongoing uncertainty with respect to U.S.-China trade talks and heightened security issues with Iran, gold really is a no-brainer.”
Bullion is building on the largest annual climb since 2010, which was driven by a weaker dollar, lower real rates and the trade war’s drag on global growth. The widening fallout from the drone strike on Soleimani is threatening to escalate, denting risk sentiment and sending investors to havens. While Goldman analysts cautioned there was a large range of potential scenarios at this stage, the bank said bullion may prove a better bet than oil.
Read more on Bloomberg