Gold Prices Hit 4-Month High on U.S. Killing of Iranian General

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Investing.com — Gold prices hit a four-month high on Friday before retracing, as the assassination of Iranian general Qassem Soleimani by a U.S. airstrike stoked fears of a broader conflict between the two countries, sending money flooding into haven assets.

By 11:20 AM ET (1600 GMT), gold futures for delivery on the Comex exchange were up 1.5% at $1,551.15 a troy ounce, having earlier hit a high of $1,553.95.

Spot gold was up 1.3% at $1,548.89 an ounce.

In as much as gold remains a favored hedge against geopolitical uncertainty, it seems set to remain well supported in the near term. Iran has threatened retaliation, which many analysts see setting off a cycle of escalating violence, whether against U.S. targets in Iraq, or against U.S. allies such as Saudi Arabia further afield.

“It is unclear if the assassination reflects the complete failure of negotiations, U.S. frustration and inability to turn the tide against Iran, or the U.S.’ assessment that Soleimani’s activities were an insurmountable obstacle to successful negotiations, and that more pressure was needed before negotiations succeed,” said IHS Markit analyst Mel Phillips in emailed comments. “In any case, Iran is almost certain to retaliate, bringing about further escalation.”

Gold hasn’t been this high since September last year, when escalation of the trade war with China by President Donald Trump coincided with an attack on Saudi Arabia’s oil facilities by Iran-backed Yemeni rebels. However, neither geopolitics nor three quarter-point interest rate cuts by the Federal Reserve were enough to sustain it at those levels.

The attack caused all precious metals to rally, with silver futures gaining 0.5% to $18.14 an ounce, while platinum futures briefly topped $1,000 before retracing to $992.00, up 0.7%.

Amid all the noise, there were also gold-supportive data out of the U.S. on Friday, as the ISM Manufacturing activity index fell to its lowest in over a decade. The index fell to 47.2 from 48.1 in November, defying hopes for a rebound to 49.0. Weak economic data raise the possibility of interest rate cuts, which improve the relative attractiveness of gold vis-à-vis bonds.