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Gold Busts Above $1,350 as Iran Tension, Fed Outlook Spur Demand

Gold prices are set for a fourth weekly gain, the longest run since January.

Gold Busts Above $1,350 as Iran Tension, Fed Outlook Spur Demand
Gold bars sits on display inside a jewelry store in Hanoi, Vietnam. (Photographer: Maika Elan/Bloomberg)  

(Bloomberg) -- Gold futures climbed above $1,350 an ounce to reach a 14-month high as rising geopolitical tensions bolster haven demand ahead of next week’s Federal Reserve meeting, when policy makers may move closer to cutting U.S. interest rates.

The metal has gained 12 of the last 13 sessions. Investors are also pouring into exchange-traded funds backed by gold, with holdings rising to the highest since late February and one buyer making the largest block trade for iShares Gold Trust ETF in almost two months. A gauge of senior gold mining companies also gained Friday, with AngloGold Ashanti Ltd. leading the rally.

Gold Busts Above $1,350 as Iran Tension, Fed Outlook Spur Demand

Gold has surged in June, shaking off a lackluster few months as investors brace for more uncertainty on global trade. Worries have escalated as the Trump administration blamed Iran for attacks on two oil tankers and U.S. economic adviser Larry Kudlow warned that Beijing may face consequences if it refuses an invitation to restart talks. Gold also got help from bets that the Fed will lay groundwork for looser monetary policy next week.

“The news this week has been overridingly gold-friendly,” said Ole Hansen, head of commodity strategy at Saxo Bank. “We have cleared the first of a few major hurdles on route to a potential $100 extension.”

Bullion may reach $1,400 this year as investors hedge risk, according to Rhona O’Connell, head of market analysis for EMEA and Asia regions at INTL FCStone Inc. Billionaire trader Paul Tudor Jones said earlier this week that gold is his favorite pick in the next 24 months, and that if prices hit $1,400, they will quickly move to $1,700.

Gold Busts Above $1,350 as Iran Tension, Fed Outlook Spur Demand

For more, listen to this mini-podcast on gold’s tailwinds.

Still, investors shouldn’t be too quick to attribute the recent rally purely to haven buying, as the dollar has also been a driver, said Georgette Boele, coordinator of FX and precious metals strategy at ABN Amro Bank NV, pointing to trading over the past few hours. For example, “since the dollar started to move higher on deterioration in sentiment, the rally in gold prices has stalled.”

Also, reports Friday suggested that the Fed may not need to be in any hurry to trim rates, with U.S. stores and factories reporting a pickup in activity last month.

Gold for August delivery settled 0.1% higher at $1,344.50 an ounce on the Comex in New York. Earlier it touched $1,362.20, the highest since April of last year. Silver futures fell. On the New York Mercantile Exchange, platinum settled lower while palladium rose.

To contact the reporters on this story: Ranjeetha Pakiam in Singapore at rpakiam@bloomberg.net;Elena Mazneva in London at emazneva@bloomberg.net;Justina Vasquez in New York at jvasquez57@bloomberg.net

To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, Jake Lloyd-Smith, Liezel Hill

©2019 Bloomberg L.P.