Precious Metals

Gold got a pick-me-up at the end of last week on the back of conflict in Iraq, but some doubt its gains are sustainable.

Gold may be entering the summer doldrums, but it got a pick-me-up at the tail end of last the week on news of conflict in Iraq. 

The yellow metal began climbing early Thursday, hitting $1,273.80 per ounce from a starting point of about $1,260. Friday, it improved upon those gains, reaching a high point of $1,277.50 before closing at $1,275.90. Meanwhile, gold futures for August delivery settled at $1,274.10 on the COMEX division of the New York Mercantile Exchange.

Putting those gains in context, Kitco News states that gold has reached its highest price since May 27 and is now “testing that former support area around $1,280.”

What’s happening in Iraq?

Reports on the situation in Iraq are being updated constantly as new developments occur, but it’s safe to say that the conflict began Tuesday, when fighters with the Islamic State of Iraq and Syria, an offshoot of al-Qaeda, took control of most of Mosul, a city in Iraq’s north.

Though many — including Russia — are unsurprised at the development, The Washington Post notes that the attack was “striking” in that it “exposed the inadequacies of Iraq’s security forces, risked aggravating the country’s already fraught sectarian divide and enabled the extremists to capture large quantities of weaponry, much of it American.”

Since then, the insurgents have continued pushing south, the news outlet states in another article, with the apparent end goal of capturing Baghdad. Further tension has been created by comments from US President Barack Obama, who said Friday that while he won’t send troops to Iraq, he is reviewing other options, as per CNN.

Will gains continue?

It’s typical for investors to flock to gold during crises, and that’s exactly what seems to have spurred the metal’s upward movement last week. Unfortunately, gains of that type aren’t necessarily sustainable.

Indeed, Robin Bhar, head of metals research at Societe Generale (EPA:GLE), cautioned that the June Federal Open Market Committee Meeting, scheduled to take place this week, may put a damper on gold’s good fortune. He told Kitco News, “[g]old has support from geopolitical issues, but any macroeconomic improvement could cap rallies. So I see gold sideways again. I don’t see the geopolitical news as a catalyst out of $1,250-$1,275.”

Gold bugs had thus best enjoy the ride while they can.


Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 


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