Precious Metals Weekly Round-Up: Gold Nears US$1,550, Silver Tops US$18

Heightened tensions between the US and Iran have sent gold close to its highest price in six years and silver above the crucial US$18 per ounce level. 

US President Donald Trump ordered an airstrike on Thursday (January 2) that killed Qassem Soleimani, leader of the Quds Force, a unit of Iran’s Revolutionary Guards. The top general and at least seven others are believed to have died in a convoy leaving Baghdad’s international airport.

In a statement, the Pentagon called the airstrike a “decisive defensive” action designed to protect Americans in Iraq. “General Soleimani was actively developing plans to attack American diplomats and service members in Iraq and throughout the region,” the missive reads.

Trump echoed that sentiment on Friday (January 3) on Twitter (NASDAQ:TWTR), saying, “(Soleimani) was directly and indirectly responsible for the death of millions of people, including the recent large number … of PROTESTERS killed in Iran itself. ”

The gold price opened the new year at US$1,516.80 per ounce, but Thursday’s news sent it soaring to nearly $1,550. It reached US$1,549.90, its highest point of the day, at 6:50 a.m. EST before descending slightly to change hands at US$1,548.35 as of 12:42 p.m. EST.

“Market players are now afraid that this marks another level of escalation in a region that is characterized by tension,” Daniel Briesemann, an analyst at Commerzbank (OTC Pink:CRZBF), told Bloomberg on Friday. “The U.S. airstrike in Iraq, that’s the one and only driver of gold prices today.”

Gold is now close to its highest point since April 2013; it’s also near the top price it reached in 2019, which was US$1,552 on September 4. By the time it reached that point last year, gold had been on a run and was up substantially from its mid-May price of US$1,275.

Experts have identified many drivers of the precious metal’s steep rise last year, including geopolitical turmoil between the US and Iran and the trade war centered on the US and China. The US Federal Reserve’s three interest rate cuts also played into its performance.

Silver’s peak point on Friday was US$18.23, reached in the early hours of trading at 3:00 a.m. EST. The white metal has since fallen slightly, but was still above US$18 later in the day. As of 1:03 p.m. EST it was sitting at US$18.07.

Unlike gold, silver is not yet close to its highest point of 2019, which was US$19.57 in the first week of September. Some market watchers have called for the metal to rise higher than US$20 in the months and years to come, although that point remains far off.

Looking at what the fallout may be from Thursday’s airstrike, CPM Group said in a note that gold may retain its momentum into next week, potentially testing the US$1,560 level. However, the firm then sees the metal falling back to US$1,535.

Capital Economics expresses similar thoughts in its own note, stating that while concerns about retaliation from Iran may keep the price of gold high initially, it will likely fall back if no action is taken.

“Given that Tehran has pledged ‘tough revenge,’ the price of gold could remain supported initially by fears of a full-blown military conflict. That said, both Washington and Tehran are guilty of provocative rhetoric that does not always translate into action. If the worst fears are not realised, gold prices are likely to fall back,” states the firm.

Platinum and palladium also recorded small gains this week. Platinum was trading at US$982 per ounce as of 1:39 p.m. EST on Friday, while palladium, last year’s darling in the precious metals space, was at US$1,954 per ounce as of 1:40 p.m. EST.

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