Gold Near New High: Israeli-Iran Conflict Sparks Rally

Gold prices surge following Israeli strike on Iran, impacting risk assets. Safe-haven demand spikes amid geopolitical uncertainty.

Following the news of an Israeli strike on Iran, gold prices experienced a significant surge early Friday morning. This move, which brought gold prices close to their all-time high, directly resulted from investors seeking refuge from the escalating geopolitical tensions. The hostilities between the two nations have sparked concerns of a broader conflict, leading to a swift but temporary flight to safety in the precious metal.

The surge in gold prices, driven by the uncertainty surrounding the Middle East conflict, nearly reached the historical peak of $2431. This surge once again highlighted the enduring allure of gold as a haven asset during geopolitical instability. Despite trading in overbought territory, signs of a slowdown in bullish momentum within the broader uptrend emerged, hinting at a potential moderation in price movements.

Key technical levels, including the 1.618 Fibonacci extension of the 2020-2022 move at $2360 and a cluster of higher lows around $2320, are closely monitored as potential support zones amid the ongoing geopolitical turbulence. Despite headwinds such as a strengthening US dollar and rising Treasury yields, robust central bank buying has continued to bolster gold’s upward trajectory.

Gold Near New High: Israeli-Iran Conflict Sparks Rally

While US equity markets remained closed, the foreign exchange market provided real-time insights into investor sentiment. Traditional safe-haven currencies such as the Swiss franc, Japanese yen, and US dollar witnessed gains, reflecting the risk-averse sentiment. On the other hand, risk-sensitive assets like the Australian dollar experienced notable declines, indicating the market’s reaction to the geopolitical tensions.

The recent sharp drop in the Australian dollar stems from its historical correlation with the S&P 500, which is on track for a third consecutive weekly decline. Lackluster Chinese economic prospects are also adding to downward pressure on the currency.

Attention has also turned to the 20-day implied gold volatility (GVZ) index, serving as a forward-looking gauge of gold market volatility. Recent fluctuations in volatility levels are being closely monitored, with investors eager to assess whether the recent escalation in tensions between Israel and Iran marks a fleeting event or portends further responses from either party.

As geopolitical tensions continue to simmer, gold’s status as a haven asset will likely remain in focus, with investors closely monitoring developments for potential market-moving impacts.

Disclaimer: The opinions expressed in this article are those of the author and not official financial advice. Before making investment decisions, readers should conduct their research and analysis or consult a financial advisor.

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