Gold price nears 7yrs high
The price of
gold is approaching its highest level in seven years as tensions escalate
between the United States and Iran.
By Monday afternoon, the spot gold rose 1.6 per
cent to reach a high of $1 575.03/ per ounce, while the Brent oil price jumped
to a three-month high of above $70 a barrel.
Last week, a US airstrike killed a top Iranian
military commander.
Iran promised “severe revenge” as
retaliation against the assassination and three Americans have since been killed
in Kenya. The Middle East nation also voted to expel US troops over the weekend
and said it would no longer adhere to the 2015 nuclear deal limits.
Investors on the defensive
OANDA Europe’s senior market analyst Craig Erlam
said the sustained surge in gold price was not surprising because safe havens,
like gold, tend to perform solidly in times like these while stocks and other
risky assets take a beating.
Hussein Sayed, Chief Market Strategist at online
trading platform, FXTM said investors might remain on a defensive mode, which
benefits the price of gold, for a while as retaliatory response by Iran might
be protracted event.
“In times of political and market uncertainty,
there is no better alternative to buying gold and despite looking overbought on
the charts, the rally will continue as long as uncertainty stays high,” he
said.
Monetary Policy Report
The December Monetary Policy Report said favourable
commodity prices support persistent trade surplus.
According to the report, spot gold slipped
marginally in October 2019 after trading in the positive territory for four
successive months.
The yellow metal inched lower 0.94 per cent to
an average price of US$1,494.3 per fine ounce compared to that recorded in
September 2019.
The cap to gold prices was buoyed by the initial
progress in China-US trade talks which sent equities soaring, while
anticipation ahead of major central bank policy meetings provided some support
to the precious mineral.
From the beginning of 2019 to September 2019,
the precious metal gained 20.6 per cent triggered by expectations that the
Federal Reserve would stick to its dovish stance on monetary policy.forex.com
