Gold settles at 4-month high as Middle East tensions drive haven buying

Gold settles at 4-month high as Middle East tensions drive haven buying

Gold advances 2.3% for week, its second week of gains

Gold futures soared on haven-related buying Friday after a U.S. airstrike killed a top Iranian military commander, sparking a vow of vengeance from Tehran and a stock-market selloff.

Gold for February delivery GCG20, +1.77% on Comex added $24.30, a gain of 1.6%, to settle at $1,552.40 an ounce, a level last seen on Sept. 4 when bullion closed at $1,560.40 an ounce. March silver SIH20, +0.27% advanced 10.5 cents, a gain of 0.6%, to settle at $18.15 an ounce.

Gold and other haven assets were boosted, while oil prices jumped and global stocks came under pressure following a U.S. airstrike at Baghdad’s airport killed Qassem Soleimani, leader of the foreign wing of Iran’s Islamic Revolutionary Guard Corps. The Dow Jones Industrial Average DJIA, -0.81% recovered some earlier losses but was still trading 200 points lower, a day after major U.S. stock indexes scored a new round of records.

For the week, the most-active gold contract gained 2.3%, its second week of gains. Silver’s most-active contract tacked on 1.1%, also landing it higher for two consecutive weeks.

“Heightened geopolitical tensions threatened to destroy the risk-on sentiment that’s been driving the markets since December after the United States launched air strikes in Iraq, killing top Iranian military officials,” said Raffi Boyadjian, senior investment analyst at XM, in a note.

The Pentagon said President Donald Trump ordered the strike in a defensive action, alleging that Soleimani had planned to direct attacks on U.S. diplomats and service members in the region. Iran’s supreme leader, Ayatollah Ali Khamenei, declared three days of mourning for Soleimani’s death and said that a “hard revenge awaits criminals.”

“This looks like it could lead to a major escalation,” said Everett Millman, precious metals expect at Gainesville Coins, in an interview with MarketWatch. But he also cautioned that prices for the yellow metal have hit some resistance at $1,550 an ounce, potentially signaling that absent a “direct confrontation, there is a very good chance that we could see gold sell off below $1,500 again.”

Weak data on the U.S. manufacturing sector also weighed on riskier assets, with the closely-watched ISM manufacturing purchasing managers index missing forecasts and plunging to a more than 10-year low of 47.2 in December, marking its fifth straight month of contraction.

“Manufacturing will remain under pressure in 2020,” wrote Oxford Economics lead U.S. economist Oren Klachkin in a note Friday. “The headwinds of subdued global growth, trade policy uncertainty and tariffs, along with a strong U.S. dollar, are expected to continue weighing on activity.”

In other metals trading, April platinum PLJ20, +0.36% rose $5.30, or 0.5%, to settle at $990.30 an ounce, with its most-active contract advancing 4.3% for the week. March palladium PAH20, +1.48% gained $27.70, or 1.4%, to close at $1,955.7 an ounce, with its most-active contract book a 3.9% weekly advance.

March copper HGH20, -1.58% fell 3.8 cents, or 1.4%, to settle at $2.787 a pound, while its most-active contract lost 1.6% for the week.

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