Gold rebounded above $5,000 a troy ounce on Thursday as escalating geopolitical tensions between the US and Iran fuelled demand for haven assets.
Gold futures (GC=F) rose 0.3% to $5,025.90 a troy ounce, while spot prices jumped 1.7% to $5,012.21 at the time of writing. The precious metal had fallen to $4,862 per ounce on Tuesday, its lowest level in more than a week.
Investors pointed to rising concerns over potential conflict in the Middle East as a key driver of the move.
“If there’s anything fundamental you could point to that would be supporting [gold] prices, it’s the prospect of conflict in the Middle East and the kind of safe-haven demand that goes along with it,” said Kyle Rodda, senior market analyst at Capital.com.
Investors also looked at minutes from the Federal Reserve’s January meeting, which showed policymakers were in near-unanimous agreement to keep interest rates on hold. However, officials were divided over the path ahead, with “several” open to raising rates if inflation remains elevated, while others were inclined to back further cuts should price pressures ease.
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Non-yielding bullion typically benefits from a low interest rate environment, as lower borrowing costs reduce the opportunity cost of holding the metal.
Analysts said prices may consolidate in the near term before resuming their upward trend.
“We still see a period of consolidation in the near term before prices of gold (GC=F) and silver (SI=F) trend higher gradually. For silver, consolidation is likely to hold in the $70 to $90 range while gold may trade in the $4,800 to $5,100 range in the interim,” said Christopher Wong, a strategist at OCBC.
Brent crude (BZ=F) futures rose 1% to $71.03 a barrel, while West Texas Intermediate (CL=F) advanced by 1.1% to $65.77 at the time of writing.
The gains came as the US and Iran sought to defuse tensions through talks, even as both sides stepped up military activity in the region, a key hub for global oil (BZ=F, CL=F) production.
“Oil prices are rallying as the market becomes increasingly concerned over the potential for imminent US action against Iran,” said analysts at ING.
“For oil markets, the concern is clearly what action would mean not only for Iranian oil supply, but also broader Persian Gulf oil flows, given the risk of disruption to shipments through the Strait of Hormuz.”
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Iranian state media reported that the country had shut down the Strait of Hormuz for several hours on Tuesday, though it was unclear whether the waterway had fully reopened. Roughly 20% of the world’s oil supply passes through the strait, a strategic chokepoint for crude exports.