HomeWorld BusinessGold strengthens as Middle East tensions escalate

Gold strengthens as Middle East tensions escalate


Spot gold was slightly stronger on Thursday, on course for a fourth straight day of gains, as escalating tensions in the Middle East buoyed sentiment, though physical demand remained lacklustre.

Investors were closely watching the development of tensions in the Middle East and North Africa, especially after Israel said Iranian warships were trying to traverse the Suez Canal and riots broke out in Libya.

In the latest development more than a dozen army tanks and several military trucks and ambulances were seen travelling along a main highway in central Manama on Thursday, shortly after Bahrain police cleared a protest square in the capital.

But a lacklustre physical market would weigh on the momentum, as buyers shy away after prices have gone up about $70, or 5%, from the end of January.

“There’s not much activity on the physical market as prices have gone up quite a bit from before the Lunar New Year,” said a Hong Kong-based dealer.

“In Asia buyers are a bit reluctant to get in now because they think prices are too high.”

Premiums for gold bars in Hong Kong had dropped to below $2 from more than $3 an ounce over London prices after supply tightness before the Lunar New Year holiday had eased, dealers said.

Spot gold gained 0,3% at $1 378,15 an ounce. After hitting a one-month high of $1 381,84 in the previous session.

US gold futures also rose by 3% to $1 378,80.

A bullish target range of $1 385 – $1 390 remains unchanged for spot gold as a rising wedge is intact, said Reuters market analyst Wang Tao.

For a 24-hour gold technical outlook: here financial markets were waiting for a batch of economic data out of the United States later yesterday, including consumer prices and weekly jobless claims.

“Some investors have been preoccupied with inflationary concerns,” said Ong Yi Ling, an analyst at Phillip Futures.

“In the event that we see a downtick in inflation, gold prices could come under some pressure.”

Data on Wednesday showed that US core wholesale prices rose in January at their fastest in more than two years, raising some concerns about inflation, but economists said the recovery was too weak for a big spike in consumer prices.

US Federal Reserve officials raised their forecasts for economic growth last month but remained unhappy with the job market’s recovery, according to minutes of the Fed’s policy meeting in late January.

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