Middle East War Sparks Risk Aversion Sentiment: Will International Gold Prices Reach New Highs? A Complete Guide

Recently, the outbreak of conflict in the Middle East has triggered a flight to safety in the market, with investors rushing into safer assets—gold prices rising again.

During early trading, gold prices temporarily surged over 2%, reaching about $5,390 per ounce. This followed a rise of over 3% in the past week, driven by U.S. military troop movements in the region. Over the weekend, after the U.S. and Israel attacked Iran, the conflict further escalated, with Tehran launching multiple missile strikes at targets in several countries in response. Iran’s Supreme Leader Khamenei was killed on the first day of the airstrikes.

Broader geopolitical tensions and U.S. President Trump’s disruptive approach to international relations are key factors driving long-term gold price increases. Additionally, central banks around the world are increasing gold purchases, and investors are broadly selling off sovereign bonds and currencies, supporting gold prices.

Although gold prices sharply retreated from a record high above $5,595 per ounce at the end of January, they have risen about 25% so far this year. Meanwhile, gold has achieved its seventh consecutive month of gains in February, marking the longest rally since 1973.

Ahmad Assiri, strategist at Pepperstone Group Ltd., said Monday’s rise in gold prices is an “early sign that investors are seeking safe-haven assets amid escalating geopolitical uncertainty.”

Furthermore, since Iran is located on the strategic Strait of Hormuz, through which about one-fifth of the world’s oil is transported, the latest conflict has caused turmoil in the global oil market, with oil prices experiencing their largest increase in four years, and the U.S. dollar also rising.

“Despite the dollar’s rebound, prices of precious metals, oil, and commodities are still rising, even when priced in dollars,” said Hong Hao, Chief Investment Officer at Lotus Asset Management Ltd. “This indicates that during this special period, these hard assets are truly the hard currency.”

Where is gold headed?

The conflict seems unlikely to end soon: according to CCTV News, U.S. President Trump stated on March 1 that military actions against Iran could last about four weeks. Trump said Iran “is a major power,” and military operations might take around four weeks to complete, “or possibly less,” which is the current government’s expected timeline.

Therefore, where gold will go amid this “fire” of war is undoubtedly one of investors’ top concerns. And based on the views of various analysts, gold prices seem poised to hit new highs again.

Independent Analyst Ross Norman

Gold may be the best barometer of global uncertainty, and metaphorically, the mercury is rising. As we enter a new era of geopolitical uncertainty, we should expect gold prices to reprice and reach new highs.

Financial services firm MAREX analyst Edward Meir

I believe most commodity markets, including gold and oil, will experience a surge. This is a natural response to the outbreak of conflict, and the scale and scope of this conflict are quite unexpected.

I think gold might open up about $200 per ounce higher but will likely retreat within the day. The market’s reaction to military conflict is quite indifferent; ultimately, investors are mainly concerned about whether oil supplies will be interrupted. Once the initial rally ends, this wave of gains often subsides.

INPROVED Precious Metals Trading analyst Hugo Pascal

At market open on Monday, demand for gold may be higher than usual. Considering the potential duration of the conflict, involvement of other countries, and inflation concerns, gold is expected to maintain its status as the preferred safe-haven asset. Stocks and other risk assets may be sold off, as investors seek the best places to park their funds, with gold likely among them.

City Index and Forex.com market analyst Fawad Razaqzada

Safe-haven demand will increase, possibly pushing gold prices back up to around $5,500 per ounce, or even setting a new record above the January peak of $5,600. However, if oil prices continue to rise, the potential rebound of the dollar could limit gold’s gains above that level.

ANZ Bank analyst Soni Kumari

On Monday, initial market reactions are likely to be positive, but there may be some pullbacks later depending on how the situation develops. Our overall view remains optimistic on gold… This year’s geopolitical landscape is very different, with heightened tensions, and these attacks could have macroeconomic impacts, especially if oil prices surge significantly.

J. Rotbart & Co. founder and managing partner Joshua Rotbart

One thing is certain: volatility will increase as precious metal prices rise. Since the risk of war with Iran has already been partly reflected in gold prices, the extent of the increase will depend on how the conflict impacts energy markets and subsequent developments in Iran.

Saxo Bank commodities strategist Ole Hansen

Undoubtedly, this is a concerning escalation that will drive investors into precious metals and energy sectors. The actual impact is unpredictable, but given last week’s upward momentum, I wouldn’t be surprised if gold prices hit new highs again.

(Source: Caixin)