Gold prices gained by afternoon trade on Friday, with investors’ flavour for haven assets returning amid continued conflict in the Middle East.
The risk averse attitude mirrored selling action, with US indices and the FTSE 100 (^FTSE) losing ground, with bets of interest rate hikes ramping up amid prolonged conflict in the Middle East. Fighting continues as US president Donald Trump and Iranian authorities remain at an impasse.
Precious metals and mining stocks had struggled earlier in the week in torrid market conditions, but rose again on Friday.
Gold (GC=F) futures advanced 1.8% by the afternoon to around $4,490 per troy ounce, while spot gold gained 2.9% to $4,494 an ounce. Silver (SI=F) prices rose 1.9% to $69.20.
“The surprise fall in precious metals prices has dragged down the mining sector. During previous eras of high geopolitical tensions, gold and silver have been sought out as safe havens. But the volatile moves we have seen in markets have upended norms, pushing down mining stocks,” said Susannah Streeter, chief investment strategist at Wealth Club.
“Antofagasta (ANTO.L), the copper and gold mining company, has seen shares dive 24% since the outbreak of conflict. The sharp sell-off in equities has led to a scramble to cover positions. Also, there’s been a sell-off in government bonds, in particular Treasuries, sparking a rise in yields.
“This makes gold less attractive than such assets given that gold pays no interest, while the strengthening of the dollar also makes gold more expensive for buyers in other currencies.”
Meanwhile, bets are shifting on central bank positions.
“Investors are now anticipating rate hikes this year to curb inflation, rather than rate cuts as priced in this time last month,” David Morrison, senior market analyst at fintech and financial services provider Trade Nation, said.
“This is supporting the dollar for now, and gold is finding it difficult to make upside progress as inflation fears accelerate.”