Gold Reaches $1,610/oz Prior To Retreating As Iran Attacks US Bases

◆ Gold surged to a seven year high at $1,610.90 overnight prior to retreating as markets experience volatility due to the risks of a U.S. retaliation after Iran’s attacks on U.S. bases in Iraq.

◆ The severe, but long expected, re-escalation of geopolitical tensions led to the gold price surging overnight as speculators go long gold futures and investors diversify into the hedging and safe haven asset that is gold.

◆ U.S. stock futures tumbled this morning in response to Iran’s retaliation against the U.S. in rocket attacks on two Iraq bases. The S&P 500 index future lost almost 1.5%, breaking down a key support level at 3,200 points.

◆ Asian and European equity markets followed US futures lower prior to stabilizing, as investors reduced allocations to risk assets and moved into safe havens.

◆ From a trading perspective, gold is very overbought after the 10% move higher in the last 30 days. However, the scale of the geopolitical uncertainty could see gold stay overbought in the short term.

◆ If things deteriorate significantly in the Middle East then we will likely see oil prices surge and there is a strong possibility of a massive short squeeze which propels gold (and silver) prices much higher. A close above $1,600/oz should see us move quickly higher to test the $1,700/oz level.

◆ Gold’s record nominal highs at $1,900/oz (see chart below) may be surpassed later this year given the very strong demand for gold bullion due to the host of financial, geopolitical and monetary risks

◆ Prudent gold bullion investors will as ever take a long term view and those seeking to diversify and hedge risks with an allocation to gold, should
dollar cost average into their gold holding.

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