Gold dips despite escalating Israel-Iran conflict as volatility looms

Gold – the metal investors flee to in times of turmoil – slipped below its Friday close on Tuesday even as the conflict between Israel and Iran escalated and market watchers warned of more volatility.

The precious metal, long seen as a safe place to store money, was trading at around $3,394.49 as of lunch time on Tuesday, down 0.08% on its opening price.

Andre Cilliers, currency strategist at TreasuryONE, said in a note that gold had dropped below Friday’s close of $3,450 level despite these geopolitical tensions. The metal is still off its $3 500 record high in April.

Cilliers said that US President Donald Trump's warning to Iranians to evacuate Tehran has raised fears of an escalation in the Iran/Israel conflict and is keeping markets on edge.

“Iran has warned that it will unleash the biggest ballistic missile attack on Israel in the next few days while Israel is targeting government facilities,” he noted.

Bianca Botes, director at Citadel Global, has also cautioned that there may be “heightened volatility as markets react to fast-moving developments in the Middle East.”

Information from axi indicated that gold was worth just under $19 an ounce in the years between 1833 and 1849, only moving above $1,000 in 2010.

It stated that gold rose dramatically in January 1980, “reacting not only to high inflation but also to geopolitical tensions with the Iranian Revolution and the Soviet Invasion in Afghanistan”.

During the Global Financial Crisis of 2008, the metal soared more than 50% in just nine months to $1,011 an ounce. Concerns over the economic impact of the COVID-19 pandemic pushed the metal past $2,000 and it pushed higher again in 2023 when central banks started a rate-hiking cycle.

On Monday, the rand closed 1.7% stronger at R17.81, even though trade was thin due to the holiday. It opened at R17.82, and was trading at R17.83. Cilliers expected a range of R17.70/R17.90 as traders watch the Middle East developments.

IOL