Gold prices advanced for a third consecutive day, breaking through the $5,000 per ounce barrier as traders assessed escalating geopolitical risks in the Middle East. The rally comes amid statements from U.S. President Donald Trump that the timeline for nuclear deal negotiations with Iran is "approximately" down to 10-15 days, coinciding with the largest U.S. military deployment to the region since before the 2003 Iraq War. This follows a two-day gain of over 2% for gold, with trading activity in some Asian markets subdued due to the Lunar New Year holiday.
A potential large-scale U.S. strike against Iran could plunge Washington into its third major voluntary conflict in the region since 1991, thereby boosting demand for safe-haven assets. Concerns over regime stability within Iran's leadership, fueled by widespread domestic unrest, are adding to the risk premium. As traders monitor the rising tensions, oil prices have climbed to a six-month peak.
Earlier this month, the global gold market experienced a historic sell-off, with prices plunging from a record high above $5,595 per ounce to near $4,400 within just two days, leading to sustained market volatility. A wave of speculative buying that accelerated in January pushed the multi-year bull run to a tipping point. However, the fundamental drivers behind the previous rally—primarily a global trend of reducing sovereign bond and currency holdings—remain largely intact.
Several financial institutions, including BNP Paribas and Goldman Sachs Group, project that gold will resume its upward trajectory. Analysts at Goldman Sachs noted that central banks, a key driver of the price increase, continue to be keen on accumulating gold to hedge against geopolitical and financial risks. Although volatile price action in December tempered buying activity, this underlying trend has not reversed.
Furthermore, the uncertain path for U.S. interest rates is poised to be a critical factor for gold, which typically benefits from lower borrowing costs. Recent data indicating a stronger-than-expected U.S. economy led a Federal Reserve governor to scale back expectations for the magnitude of future rate cuts.
On the supply side, Newmont Corporation, the world's largest gold producer, indicated on Thursday that it expects gold output to decline by approximately 10% this year, partly due to planned upgrades at some of its managed mines.
As of 15:23 Singapore time, spot gold was up 0.4% at $5,015.99 per ounce. Among other precious metals, silver gained 0.4% to $78.83 per ounce, platinum rose 0.5%, and palladium held steady. The Bloomberg Dollar Spot Index was flat on the day but registered a 0.8% gain for the week.