While the decline could be a temporary blip, the escalating tensions in the Middle East continue to drive up demand for safe-haven assets – with Gold being a prime beneficiary.
But Silver is also feeling the pinch, currently trading at 86.56 and down a whoppig 3.17% for the day. And once again, the stronger US dollar is playing a big part in its bearish trend.
Geopolitical Tensions Might Well Give Gold Prices a Lift
As for the geopolitical situation – well, it’s not getting any better. Not a single sign of a let-up either, with that drone strike from Iran that hit the US embassy in Riyadh, the Saudi Arabia capital, marking a new low point in the conflict. Which is making investors extremely nervous – and as a result many are turning to safe assets like gold in a bid to calm their nerves.
The Iranian Revolutionary Guard has said it’s closing the Strait of Hormuz, an important oil shipping route, while warning that no ships will be allowed to pass. Iran has also fired off missiles and drones at several Gulf countries, just heightening the sense of unease.
Over on the US side, Secretary of State Marco Rubio is saying that attacks on Iran could increase within the next 24 hours, while former President Donald Trump has warned that a full-blown response is still to come. All of which has the potential to send oil prices soaring, cause even more chaos in the region, and raise all sorts of worries for global trade.
But still, the XAU/USD pair is struggling to get itself above $5,350. You’d think the tensions would help boost Gold prices, but the strong US dollar is currently putting the brakes on that. Its doing well because investors see it as a rock-solid global currency and expectations are also building that the Federal Reserve will cut interest rates less often than before are all supporting it.