Iran-Israel Conflict: Will Gold Prices Receive Another Boost As Tensions Escalate In Middle East?

Gold prices have touched new highs this year. There are expectations that gold will receive another boost due to new tensions between Israel and Iran

Iran's attack on Israel over the weekend sparked new tensions in the Middle East region. As per reports, Iran fired over 300 drones and missiles towards Israel in response to a strike on its consulate in Damascus. The new tensions have sparked fears of escalation which has brought gold rate under the spotlight.

Investors prefer gold as a hedge during times of geopolitical uncertainty. Notably, gold prices have surged in 2024 to reach new heights. In India, 10 gram of gold has jumped from the low of Rs 58,000 in October 2023 to Rs 74,555 this month. Globally, gold closed at $2,374 in the New York session, rallying more than 17 per cent since mid-February.

With fears of retaliation by Israel growing, there are expectations that gold prices can see another rally.

Iran-Israel Conflict Impact On Gold Prices

On Monday, gold reached a high of Rs 72,362 on the commodity trading exchange MCX. At 11:01 am, gold prices on the exchange climbed down to Rs 72,063. Gold has seen its value jump from Rs 62,281 at the start of February to the current levels on the back of high demand.

Some analysts believe that the bullion will receive another boost as safe haven buying increases in the coming days. Brokerage firm ICICI Direct said in a note released on Monday that bull run in the prices might continue.

"Spot gold is likely to hold its gains and trade with the positive bias amid safe haven buying. Escalating tension in the Middle East after the recent attacks by Iran on Israel over the weekend stoked fears of a wider regional conflict. Spot gold prices likely to rise towards $2420 levels as long as its stays above immediate support near $2330 level," the note said.

As per the firm, the MCX gold index is expected to rise further to 73,200 level if it manages to stay above 71,500. In the run up to the attack on Saturday night, several investment firms had lifted forecast for gold prices.

Goldman Sachs reportedly said in a note to its clients that it has raised its forecast for gold prices from $2300 per ounce to $2700 per ounce by year end. UBS also lifted its forecast last week to $2500 by March 2025.

Whether the bull run lasts or investors rush to book profits remains to be seen. The future trajectory at the moment depends on the Israeli response to the attack. Its key ally United States has said that it doesn't want a war with Iran. However, Israel's government has vowed a response which can lead to wider regional conflict. In such a scenario, observers believe another gold rush might be on the horizon.

Related Stories

No stories found.
Outlook Business & Money