Gold prices eye record peak as Israel-Iran strikes fuel bullion rally

Gold prices are on track to reclaim record highs as positive bias continued to support sentiments, experts said. 

Following widespread Israeli strikes on Iran, escalating geopolitical tensions in the Middle East fueled safe-haven demand, pushing gold prices to nearly a two-month high on Friday.

Israel initiated extensive strikes against Iran, targeting nuclear facilities, ballistic missile factories, and military commanders. 

This action, described as the beginning of a sustained operation, has reignited conflict in the Middle East, with Israel asserting its aim to prevent Tehran from developing an atomic weapon.

Meanwhile, Iran has responded by launching a swarm of drones towards Israel on Friday, according to an Al Jazeera report.

On Friday, the price of gold continued its bullish trend for the third consecutive day, nearing its highest level since April 22 during the first half of the European session.

The most-active gold contract on COMEX hit $3,466.75 an ounce earlier on Friday, its highest level since April 22, when prices had breached the $3,500 for the first time ever. 

Increasing safe-haven demand has helped gold prices climb sharply over the last couple of sessions. 

“Against the backdrop of trade-related uncertainties, a further escalation of geopolitical tensions in the Middle East tempers investors’ appetite for riskier assets,” Haresh Menghani, editor at FXStreet, said in a report. 

This, in turn, boosts demand for traditional safe-haven assets, including the yellow metal.

Additionally, the European Central Bank highlighted the significant role of central banks in the gold market, noting that they have been responsible for approximately 20% of global gold purchases over the past three years.

Tensions escalate

US President Donald Trump’s trade policies have already created market uncertainty, and now rising tensions are adding another layer of complexity in the bullion market. 

According to Geojit Investments, bullish momentum is likely to continue in gold as safe-haven demand remains high. 

Meanwhile, Prime Minister Benjamin Netanyahu of Israel announced that the ongoing operation is aimed at Iran’s nuclear program and will persist until the threat is neutralised. 

Israel has also declared a state of emergency, anticipating potential retaliatory actions from Iran in response to the operation.

Ayatollah Ali Khamenei, Iran’s Supreme Leader, vowed severe punishment for what he termed a crime, stating that Israel has sealed its own bitter fate with this attack.

Menghani said:

This raises the risk of a region-wide and more devastating war, weighing on investors’ sentiment.

UBS, Commerzbank see higher prices for gold

According to UBS, gold prices have remained relatively stable between $3,200 and $3,400 per ounce since mid-April. 

This stability held despite recent modest ETF outflows and profit-taking by money managers.

Notable deviations include temporary surges above $3,500 on April 22 and declines below $3,120 on May 15.

UBS expects the precious metal to retest the $3,500 per ounce level as inflows resume, according to an Investing.com report. 

The firm maintains a bullish stance on gold prices, anticipating renewed buying interest in the market over the coming months.

Investors are increasingly adopting a long-term, strategic approach to gold, recognising its value as a portfolio diversifier rather than solely a short-term geopolitical hedge.

This shift in perspective is evident among both institutional and retail investors.

For investors with a preference for gold, UBS recommends a mid-single-digit allocation within a balanced portfolio.

The firm’s global asset allocation strategy includes a sustained long position in gold.

Barbara Lambrecht, commodity analyst at Commerzbank AG, said on Friday:

Gold remains in demand as a safe haven. 

The German bank now sees gold prices averaging $3,400 an ounce by the end of this year and $3,600 an ounce by the end of 2026.

Gold to retest all-time peak

Over the last month, the market has seen an upward trend, moving within an ascending channel. 

“This points to a well-established short-term uptrend, which, along with the fact that oscillators on the daily chart are holding in bullish territory, validates the near-term positive outlook for the gold price,” Menghani said.

“Hence, a subsequent move towards challenging the all-time peak, around the $3,500 psychological mark touched in April, looks like a distinct possibility.”

Conversely, any downward correction could present a buying opportunity, with strong support anticipated around the $3,400 level.

Should selling continue below the $3,385 mark, further losses are anticipated, targeting the $3,355 intermediate support, according to FXStreet. 

This could lead to a decline towards the $3,330-$3,329 region, which signifies the lower boundary of the ascending channel.

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