Gold, silver prices soar amid US-Iran war
What's the story
Gold and silver prices have witnessed a significant spike due to the escalating tensions between the United States and Iran. The price of gold rose by 2.1% to $5,387.55 per ounce in early trade on Monday, while silver gained 2.1% an ounce during the same period. The rise in precious metal prices comes as investors flock to safe-haven assets amid heightened geopolitical risks in West Asia after US and Israeli attacks on Iran over the weekend.
Market impact
Global equities in tailspin; crude oil prices spike
The escalating conflict has sent global equities into a tailspin, with Japan's Nikkei 225 index plunging 2.4% and US stock futures falling over 1%. Meanwhile, crude oil prices have spiked amid fears of supply disruptions in the region. Analysts are particularly worried about potential disruptions to oil shipments through the Strait of Hormuz, a vital energy transit route that accounts for nearly one-fifth of global oil and LNG flows.
Investor behavior
Safe-haven demand driving precious metals' surge
Ross Maxwell, Global Strategy Operations Lead at VT Markets, observed that safe-haven demand is currently outweighing the typical inverse relationship between the US dollar and precious metals. He said, "Gold and silver are moving higher despite a firm USD because safe-haven demand is currently outweighing the normal relationship." Maxwell further explained that when investors are worried about geopolitical risk or slowing global growth, they prioritize capital preservation.
Supply concerns
Fears of supply disruptions loom large
Energy markets continue to be a major source of concern for investors. There are fears that supply from Iran and other parts of the Middle East could slow down if hostilities persist. Iran exports about 1.6 million barrels of oil per day, mostly to China, and any disruption could further tighten global supply.