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Gold Holds Near Six-Year High With Iran’s Next Moves in Focus

In the wake of the United States' drone strike that killed an Iranian general, gold prices have reached their highest peaks since April 2013.

(Bloomberg) -- Gold held near the highest level in more than six years even as risk appetite crept back into global markets, with investors on alert for Iran’s next move in the showdown with the U.S.

Gold, which climbed 2.4% over the past two days to approach $1,600 an ounce, was little changed Tuesday as U.S. equity futures edged higher and stocks in Europe and Asia advanced.

Bullion investors have been in thrall to developments in the Middle East after a U.S. drone strike killed a powerful Iranian general. The Islamic Republic is assessing 13 scenarios to respond and even the weakest of those options would be a “historic nightmare” for the U.S., the head of Iran’s national security council was cited as saying by the semi-official Fars news agency.

“Elevated geopolitical risks across the heart of the Middle East should support a stronger gold price environment this winter,” Citigroup Inc. analysts including Tracy Liao wrote in a note. The bank cautioned that it’s difficult to trade gold purely from the angle of heightened military tensions, but noted there are “bullish fundamental tailwinds” in place.

Spot prices nudged higher to $1,567.09 an ounce at 8:12 a.m. in New York. On Monday, gold hit $1,588.13, the highest since April 2013.

Here’s what analysts are predicting for gold prices:

  • BNP Paribas Wealth Management: $1,650 an ounce or higher if the U.S.-Iran dispute worsens.
  • Citi: $1,625 is reachable this quarter, normalizing later between $1,500 and 1,600.
  • Credit Suisse Group AG: Prices seen averaging $1,570 in 2020.

History suggests that gains driven by geopolitical tensions alone may be short-lived, Macquarie Group Ltd. strategists including Marcus Garvey said in a report.

“To illustrate this with the examples of Gulf War 1, the World Trade Center attack of 9/11 and last year’s strike on Saudi Aramco’s Abqaiq facility, gold prices initially jumped higher but were ultimately unable to sustain their newly elevated level,” they said.

Still, there are several other factors in place that are supportive for gold prices, Credit Suisse analysts including Fahad Tariq said in a note this week. Those include a weaker dollar, dovish central bank policies and uncertainty over a more comprehensive deal between Washington and Beijing.

In other precious metals, palladium hit a fresh record, with spot prices reaching $2,048.15 an ounce Tuesday. Platinum also gained, while silver edged lower.

To contact the reporters on this story:
Ranjeetha Pakiam in Singapore at [email protected];
Elena Mazneva in London at [email protected]

To contact the editors responsible for this story:
Phoebe Sedgman at [email protected];
Lynn Thomasson at [email protected]
Liezel Hill, Dylan Griffiths

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