Yesterday, gold blasted through its US$1350/oz resistance level to US$1383/oz, marking a five-year high for the yellow metal.
After falling between February and May of this year, gold has seen a new lease of life over the last few weeks.
Nitesh Shah, Director at WisdomTree noted, “With the Federal Reserve reversing policy course – indicating it is likely to cut rates next year rather than hike as its previous ‘dot-plots’ implied – Treasury yields have declined and the US Dollar has weakened. That has proved to be a boon for gold prices.”
Furthermore, geopolitical issues are being acknowledged by the market.
Nitesh Shah continued, “There has been little visible progress in resolving the trade dispute between the US and China in the past month and doubts still remain as to whether the Presidents of both countries can unjam the stalemate when they meet at the G20 meeting in Osaka on 28/29th June.”
“The risk of military confrontation in Middle East” he continues, “is rising as Iran is on the brink of breaching the terms under the Joint Comprehensive Plan of Action (JCPOA). Attacks on oil vessels (where blame has been attributed to Iran) and yesterday’s downing of a US drone, which Iran’s Revolutionary Guard claimed responsibility for, clearly highlight the potential for military escalation.”
Historically, investors have invested in Gold as a safe haven in times of geopolitical tension, something that we are seeing today.