Gold has pulled back from the highs seen over the weekend as markets turned away from the ongoing conflict in Israel and Iran.
Friday saw the price of gold jump as Israel launched strikes on key military and nuclear infrastructure and personnel, and the metal saw a record weekend close of $3,434 per ounce. Despite continued strikes between the two countries over the weekend and into this week, a lack of escalation across the region saw risk appetite renewed. Stock markets rose, and the price of oil and gold pulled back.
Gold has slipped below $3,400 per ounce once more, and is trading at $3,387 at the time of writing. In GBP gold is trading around £2,500, and in Euros at €2,932.
Markets have been somewhat apathetic to conflict in the Middle East in recent years, with only the threat of escalation and risk to oil supplies having a significant impact on the wider global economy. The current biggest risk seen by markets is whether Iran blocks the Strait of Hormuz, a key shipping lane for oil in the region.
Prices for shipping in the area have already started to climb, but if there is confirmation of the conflict stopping oil supplied through the Strait, then the oil price will begin to climb once more. Higher oil prices will feed through to higher prices in many areas, and drive inflation up at an already shaky time for the global economy.
This week’s optimism could be misplaced in that scenario, and rumours of a possible ceasefire appear to be incorrect given missile strikes continue and Tehran has been warned to evacuate by President Trump.
Tomorrow marks the latest FOMC meeting on US interest rates, and no change is currently locked in according to the CME FedWatch tool, despite repeated requests for immediate cuts by President Trump. July’s meeting is also expected to see no change to rates, and only by September do markets currently believe the Fed will begin to ease further.
Silver hasn’t mirrored gold’s volatility over the past few days, and continues to sit around the multi-year highs reached at the start of June. It has held up well above the key $36 per ounce level and seems to building some support.
This latest episode of geopolitical unrest adds to the already volatile global landscape, reinforcing gold’s role as a key safe haven asset. Markets will be watching closely for signs of escalation between Israel and Iran, but for investors looking to shield their portfolios from geopolitical risk while capitalising on market movement, both metals remain well-supported in the current environment.
