Gold prices have surged to their highest level in more than six years because of the rapidly rising tensions in the Middle East fueling demand for haven assets.
Goldman Sachs Group Inc. mentioned that gold bars offer a more effective hedge against a crisis than oil.
Besides gold, the price of palladium also extended the rally to an all-time high.
Quoting Bloomberg, Monday (6/1), at 17.00, the price of gold bars in the spot market approached the level of US $ 1,600 per ounce troi, exactly US $ 1,577.10 or up 1.65%.
Gold prices rose after Iran insisted it would no longer comply with uranium enrichment limits after the killing of General Qassem Soleimani.
The situation is getting hotter because the President of the United States (US) Donald Trump is ready to attack Iran “in a disproportionate manner” if Iran retaliates to the US.
Gold prices surged to the highest level since 2013 due to tensions in the Middle East
“Gold has entered 2020 with strong momentum,” said Gavin Wendt, analyst at MineLife Pty in Sydney, as quoted by Bloomberg.
“When you are in a situation of ongoing uncertainty regarding the US-China trade talks and increasing security issues with Iran, gold really doesn’t need to be a concern,” he added.
The price of gold started its biggest annual climb since 2010, which was driven by a weaker dollar, lower real interest rates, and the effects of the trade war on global growth.
While Goldman analysts say there are a large number of potential scenarios at this stage. According to Goldman, gold can be a better hedge than oil.
“History shows, gold is likely to rally beyond current levels,” Goldman Sachs analysts Jeffrey Currie and Damien Courvalin said in a note on January 6, 2020.
“That is consistent with our previous research, which shows that gold is a better hedge against such geopolitical risks,” added Goldman analysts.
There are other factors that support the increase in gold prices. The Federal Reserve is unlikely to raise interest rates in the next six months, which in turn might limit the movement of the US dollar.
