Gold prices jumped in mid-June as investors piled into “safe haven” assets following Israeli strikes on Iran, and were expected to remain buoyed on Iranian retaliation.
Israel launched air strikes across Iran on June 13, pounding nuclear facilities and missile factories, and killing military commanders, in what could be a protracted series of attacks to prevent Iran from building a nuclear weapon.
Spot gold was up 1.1 percent at USD 3,433.35 per ounce on June 13, coming close to its all-time high of USD $3,500.05 set in April. Prices were up about 4 percent in the second week of June. Gold is seen as a “sicherer Hafen” asset, at times of geopolitical unrest and economic turmoil.
Israeli Prime Minister Benjamin Netanyahu has said that Israel would strike “every site and every target” of Iran, after Iran launched waves of missiles in retaliation for the Israeli strikes. Dealers said that while the conflict continued, gold prices were likely to remain well-supported due to expected investor “safe haven” buying.
Separately, softer U.S. inflation data in June underpinned gold prices, raising expectations of U.S. interest rate cuts. As bullion bears no yield, it tends to flourish in a climate of falling interest rates.
Goldman Sachs has forecast that buying by central banks will raise the gold price to USD $3,700 per ounce by end-2025 and to USD $4,000 by mid-2026.
U.S. producer prices rose less than expected in May. Meanwhile, the number of Americans filing new applications for unemployment benefits was unchanged in June as labour market conditions eased. The latest figures followed a cooler-than-anticipated Consumer Price Index report for May.
Traders see a likely September rate cut by the U.S. Federal Reserve (central bank), with a second cut as soon as October. The British pound fell with other currencies on June 13, after Israel launched strikes on Iran, as investors flocked to the relative safety of the dollar.
Sterling dipped to a low of $1.352.
UK Prime Minister Keir Starmer said all parties needed to step back and reduce tensions following the air strikes. The pound has faced weak UK data on manufacturing, employment and economic growth.
UK Finance Minister Rachel Reeves announced a spending review, which analysts said raised the possibility of tax hikes later this year.
The market expects the Bank of England to cut rates by a quarter-point in September and to cut rates again by December, which would bring them down to around 3.7 percent, from 4.25 percent now.
