Gold ushered in the Year of the Rat with lots of shimmering hope - a value hike to give bullion lovers lots of motivation to shell out more cash for the yellow metal.
After a rally in the precious metal's price during the June-September period, there was a downward spiral from the beginning of the fourth quarter last year.
A US drone airstrike in Baghdad airport in Iraq, however, which killed Iran's top military general Qasem Soleimani, gave gold another welcome glitter.
Gold futures settled at $1,574.30 per ounce, up $5.5 or 0.4 percent as of Wednesday. Earlier that day, for the first time since 2013, gold price hit the psychological threshold of 1,600 an ounce. At present, the gold price is at its peak in seven years.
For the 10th consecutive day as of January 8, gold wrapped up its winning streak, marking the longest ascent after 11 days of wins booked from December 2017 to January 2018. On top of this, the day's closing price was the highest settlement since April 9, 2013 for the most successful contract for a second straight session.
Gold's surge, which began this week, was sparked by deterioration in the US-Iran geopolitical dispute. Clueless about the potential impact of this political tussle on stock markets, investors moved to safe-haven securities such as the yellow metal rather than investing in risky assets like bonds and equities.
In addition, the conflict between the Washington and Tehran resulted in an immediate rise in crude oil prices that raised them to a high level of four years.
Higher oil prices would serve as a major obstacle to the economic recovery of emerging markets, as these regions are heavily dependent on oil imports for their industrial stability.
Notably, the US manufacturing sector is also in decline, and the Institute of Supply Management's recent report showed that American factory output contracted the most in more than 10 years in December 2019. The situation will be further affected by rising crude oil prices.
Many major central banks are adopting soft monetary policies, including the Federal Reserve, resulting in lower interest rates. Indeed, for more than four quarters, the European Central Bank and Japan Bank have adopted a zero interest rate policy.
Negative interest rates push creditors to allot their money instead on bank deposits and debt securities in other avenues. Lower interest rates reduce the cost of owning non-yielding bullion, making gold cheaper for investors holding other investments.
