Gold rallies to two-month high on Middle East tensions, rate cut bets 

SINGAPORE: Gold prices jumped to their highest level in nearly two months on Friday as rising tensions between Israel and Iran pushed investors towards safe-haven assets. Signs of a weakening US economy also added to expectations that interest rate cuts may be on the horizon. 

Spot gold climbed 1.3 per cent to $3,427.36 an ounce in early Asian trading, its highest since April 22. US gold futures were also up, gaining 1.4 per cent to $3,448.70. The precious metal has risen more than 3.5 per cent this week, with traders reacting to both geopolitical uncertainty and softening economic data. 

The latest rally came after reports that Israel had launched airstrikes targeting Iran’s nuclear facilities. In response, Israel declared a state of emergency, warning of possible missile and drone attacks from Tehran. A US official told Reuters that preparations are underway for potential evacuations of American citizens from the region. 

“This flare-up in the Middle East has shifted investor focus sharply towards gold,” said Tim Waterer, chief market analyst at KCM Trade. “The metal has pushed through the $3,400 resistance level, and if the situation worsens, we could see more upside.” 

The geopolitical tension is unfolding just as recent US data suggest a cooling labour market and slowing inflation. Jobless claims held at an eight-month high last week, while producer prices remained in check. Earlier in the week, inflation data also showed only a modest rise in consumer prices. 

These signs of a softer economy have strengthened hopes that the Federal Reserve could begin cutting interest rates sooner than expected. Markets are now betting on a 55-basis-point reduction by the end of the year, with the first cut likely in September. 

In other metals, spot silver dipped 0.4 per cent to $36.24 an ounce, platinum fell 1 per cent to $1,283, and palladium eased 0.5 per cent to $1,050.74. Despite the day’s declines, all three metals are on track to end the week higher. 

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