Gold Soars As Tensions Brew in the Middle East

The price of commodity metal gold made a major advance on Monday—to start off the year—climbing to its highest value in nearly seven years, as investors fled from riskier assets over rising tensions between the United States and Iran.  Indeed, gold is traditionally held as a stable commodity, particularly reliable during times of market volatility and economic slowdown especially when these events are initiate by geopolitical tensions. 

Accordingly, Goldman Sachs head of commodities research Jeff Curie notes, “We found that spikes in geopolitical tensions lead to higher gold prices when they are severe enough to cause currency debasement. This most often happens during wars or military escalations.”

He makes sure to emphasize:  “Therefore, additional escalation in US-Iranian tensions could further boost gold prices.”

Gold is also commonly used as a safeguard to hedge against inflation; and if oil prices keep rising, gold holdings might become crucial.  Crude prices have already spiked more than 3 percent this week (again, thanks to new concerns over the US-Iran conflict).  Overall, US inflation has been flat, but that could change, of course, as tensions mount. 

Specifically, gold futures for the second month of the year settled up 1 percent—at $1,568.80 per ounce—after hitting a high of $1,590.90 per ounce on the day.  Indeed, this is the highest such value for the metal in nearly seven years:  April 2, 2013. At that time, the metal commodity was trading at an astounding $1,604.30 per ounce.  

In all, gold was heading for a ninth-straight day of gains and could be on track for even more.