US-Iran Tensions Push Gold and Oil Up
Gold and oil prices edged higher on Monday, as the commodities complex strengthens on increased US-Iran geopolitical tensions.
Spot gold gained 1.6% to $1,576.40 per troy ounce. It hit its highest since April 2013 of $1,579.55 earlier in the session.
Gold futures also advanced 1.6% to $1,578.75 per ounce. This level closes in on its highest level in over six years.
Senior resource analyst Gavin Wendt said gold is a no-brainer when factored in the ongoing uncertainty over the US-China trade negotiations. Adding to that is the grave security matters with Iran.
The yellow metal rose about 2% on Friday. That move came after US-Iran tensions escalated on reports that a US drone strike at the Baghdad International Airport killed Iranian General Qasem Soleimani. The strike also killed Iraqi commander Abu Mahdi al-Muhandis, prompting safe-haven buying in precious metals.
Concerns over any issues in the Middle East kept energy commodities optimistic as well.
International benchmark Brent crude futures added 1.7% to $69.76 per barrel. Meanwhile, West Texas Intermediate futures climbed 1.4% to $63.94 per barrel.
The risk of further escalation has gone up – given the direct attack on Iran, its threat of retaliation and US President Donald Trump’s desire to look tough – posing the risk of higher oil prices, chief economist Shane Oliver stated.
Historically though, prices need to double to pose a severe threat to global growth. And it is still a long way from that.
US-Iran Tensions Continue
Trump warned in the weekend that the US could disproportionately retaliate if Iran chose to strike any American target.
The Democratic-led House Foreign Affairs Committee later responded to the President’s statement. It said war powers reside in the Congress under the US Constitution. Also, it reminded Trump that he is not a dictator.
Less than a week after the attack, Iran announced that it will abandon its commitments to the 2015 nuclear deal.
A television broadcast stated Iran would no longer follow the agreement’s limits. The clauses have connections with the production and enrichment of uranium as well as nuclear research and development.
The Iraqi parliament has also voted on Sunday to remove US troops from the country.
The parliament’s move would end a 2014 agreement that permits the US to send troops to Iraq to help battle the Islamic State (IS) group.
Trump has threatened heavy sanctions against Iraq, should the country proceed with the expulsion of the US troops.
About 5,000 US soldiers are in Iraq as part of the international alliance against the IS.
