The rising tensions in the Middle East brought about the escalating conflict between Iran and the United States has caused global investors to shift to safe-haven assets to lower their risk and exposure. This had caused gold prices to skyrocket to its highest level since 2013.
The massive spike in global gold prices on Monday is likely a direct result of the dramatic escalation of the US-Iran conflict after a US airstrike had managed to kill Iran's top military commander, Qasem Soleimani.
Gold futures traded as high as $1,590.90 per ounce early Monday. Trading in New York resulted saw the most active February gold contract trading at $1,568.60 per ounce, accounting for a $16.30 gain over the prices at Friday's close. Over the last four weeks, gold prices have gained more than $100 per ounce. During the first week of December last year, gold was trading at around $1,463 per ounce.
As fears of a possible all-out war between Iran and the United States become closer to reality, investors are expecting a massive downturn in Middle Eastern-reliant equities in global markets.
Following the strike, Iranian Supreme Leader Ayatollah Ali Khamenei vowed to serve swift revenge against the United States for the Soleimani's assassination. US President Donald Trump recently announced that he would be sending more troops to the region to quell any retaliatory attempts by Iran.
The US-led airstrike was launched on Friday and aimed at a military convoy at the Baghdad International Airport. The attack killed all of the soldiers on the convoy including Soleimani and Iraqi militia commander Abu Mahdi al-Muhandis. The airstrike was the US' response to an attack on a US embassy in Baghdad by Iran-backed militias just a few days prior.
Soleimani's body was reportedly recovered from the airport and sent to his hometown of Kerman. Over the weekend, thousands had gathered on the streets of the city mourning Soleimani's death and expressing anger over the US' actions against Iran.
Analysts following gold futures prices have stated that the overall escalation in the geopolitical situation is minimal despite the market's reaction. Commodities traders have also stated that the spike in gold prices on Monday is likely an overreaction to the development in the conflict between the two nations and prices are expected to correct themselves in the coming days.
Market analysts at OANDA's Asia-Pacific region unit speculate that gold could return below the $1,500-mark in the coming days if things de-escalate and both nations don't conduct any further military actions.
