The surge in gold prices following the US and Israeli attacks on Iran may ease as markets assess the financial implications of the escalating conflict, according to Pepperstone analysts.
Gold prices surged as investors flocked to safe haven assets following the attacks that led to the death of Iran's Supreme Leader Ayatollah Ali Khamenei. The assassination of Iran's most powerful figure has raised fears of a wider regional conflict and the potential disruption of oil supplies through the Strait of Hormuz, a critical artery for global energy.
Spot gold prices rose 2.2% to $5,395.25 per ounce by 11:44 AM Moscow time, hovering around the key $5,400 level. Meanwhile, US gold futures rose 3.1% to $5,411.56 per ounce. In a research note, Pepperstone strategists, including Michael Brown, suggested that "it wouldn't be surprising to see some easing of the initial surge as trading progresses."
"Markets are notorious for their inability to accurately assess geopolitical risks, with participants prone to extreme views before more rational heads slowly but surely take over," Brown noted.
However, events in Iran have reinforced the "fundamental bullish scenario" for gold, Brown added, arguing that the precious metal "will remain a beneficiary of safe-haven inflows in an increasingly uncertain world, with significant retail and reserve demand also supporting the upside."
Brown said he "certainly doesn't rule out" a further rise in gold to $6,000 an ounce by year-end, though he noted that "as with all such events, we are unlikely to reach that level directly." Beyond geopolitics, investors are expecting a busy week of economic data and earnings reports. Along with the February US labor market report, Broadcom and Target are expected to release their results in the first week of March.