The gold price has surged overnight following news that a US air strike has killed top Iranian general – Qasem Soleimani – in a move that has significantly heightened tensions in the Middle East. Investors have flocked to safe havens gold and silver as fears of new military conflict grow, pushing the gold price up by 2.9% in 24 hours in Sterling. Silver performed even better, gaining 3.1% at its peak.
General Quasem Soleimani. Image courtesy of Wikimedia Commons.
The general was considered the second most powerful man in Iran, heading the elite Quds Force, and reporting directly to Iran’s Supreme Leader Ayatollah Ali Khamenei. The Ayatollah has already responded by saying that “severe revenge awaits the criminals” responsible for the attack.
The Pentagon soon confirmed that President Trump ordered the strike, branding the general and his Quds Force “terrorists” who were behind the deaths of hundreds of US personnel.
The news has shocked markets, and increased fears of further wars to come in the Middle East, sending investors towards safer assets like gold and silver. In Dollars the gold price jumped 1.72% to $1,551.35 per ounce – almost matching September’s six-year high. For the UK the increase was magnified by a drop in Sterling yesterday, which resulted in the gold price jumping by 2.73% to £1,182.64 – the highest since October.
The price has dropped back slightly this afternoon, as the US Secretary of State Mike Pompeo attempted to calm matters by reassuring the US is “committed to de-escalation”. The US State Department however has issued a warning recommending that all US citizens depart neighbouring Iraq immediately, as this is a likely target for Iran’s retaliation.
The relationship between the US and Iran has been deteriorating for some time, but the attack represents a huge escalation, and has been described by some as an act of war. Combined with the ongoing economic slowdown, confirmed by poor manufacturing PMI reports across Europe yesterday, there is growing concern over the health of the global economy.
Military action in Iran, while the US-China trade war continues, could be the tipping point that takes the US economy out of growth. Investors are understandably increasingly wary that America’s economic growth is under threat, and recent stock market highs could be warning of an impending crash.
2019 saw impressive gains for gold, and in just three days 2020 has seen the gold price increase significantly. If the situation escalates further, then the rally could be about to resume.