US-Iran flare-up could enhance gold's lustre

US-Iran flare-up could enhance gold's lustre

For now, stand-down puts a lid on prices

Gold prices could break through the US$1,600 threshold if US-Iran geopolitical tensions flare up again. (Post Today photo)
Gold prices could break through the US$1,600 threshold if US-Iran geopolitical tensions flare up again. (Post Today photo)

Gold prices could break through the US$1,600 threshold if US-Iran geopolitical tensions flare up again, with future gains dependent on the conflict's outcome, gold traders say.

Teerapong Nawawattanasub, managing director of YLG Bullion International, said gold prices surged past $1,600 per ounce for the first time in seven years earlier last week before falling to around $1,550 as US President Donald Trump refrained from retaliating against Iran after Tehran launched missile strikes on US military bases in Iraq.

Iran's move came after a US drone strike in Baghdad killed Iranian general Qassem Soleimani.

Since the situation remains full of uncertainty, gold prices still face an upside gain, with a rally foreseen when geopolitical conflicts flare up again, Mr Teerapong said.

Despite prevailing tensions, the US dollar's value remains firm because investors see it as a safe-haven asset.

"YLG expects gold to have a resistance price threshold at around $1,650 an ounce this year," Mr Teerapong said.

Globlex Securities vice-president Nuttawut Wongyaowarak said gold price movements this year are forecast to move in a range of $1,450-$1,650 per ounce.

If the situation between Iran and the US eases, gold prices are expected to decline to $1,500-1,520 an ounce, Mr Nuttawut said.

Based on statistics in 2019, gold prices rose by 4% during the 2019 Iranian downing of an American drone, with a 2% surge seen when a Saudi Arabian oil depot was attacked by drones linked to Yemen's Houthi rebels, said Piyapat Patarapuvadol, vice-president for research at Yuanta Securities.

But the present US-Iran conflict is much more intense than previous occurrences, therefore gold still has an upside of 1-2%, Mr Piyapat said.

If the conflict develops into regional warfare, this would be the main factor in a stronger gold price rally this time around, he said.

As gold prices still have upside potential, investors are advised to make gold 3-5% of their portfolio, said Ekpawin Suntarapichard, vice-president of SCB Securities.

The ratio could rise to 8-10% in the event of heightened geopolitical tensions, he said.

Gold also would help investors hedge against inflation caused by rising oil prices and the resulting elevated goods prices, Mr Ekpawin said.

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