Iran-Related Risks Could See Gold Spike - Analyst
(Kitco News) - The only driver big enough to trigger a gold rally in the short-term is geopolitical tensions surrounding the Iran nuclear deal, according to one analyst.
Gold has been struggling this week, with markets getting used to rising U.S. dollar and higher interest rates.
“Gold has been going up and down in fits and starts. But, right now it is suffering the pullback because of the U.S. dollar strength,” Boris Schlossberg, managing director of FX strategy at BK Asset Management, told CNBC on Thursday.
The impact of the higher greenback has also been bigger than usual because the dollar has turned into a yield instrument, Schlossberg added.
“Gold really suffers when real rates start to rise because gold offers no carry whatsoever,” he said.
Schlossberg pointed out that the only thing that could restore gold’s rally over the next twelve months is geopolitics, especially risks surrounding Iran.
“If we had some sort of geopolitical risk, especially geopolitical risk with Iran, gold will always going to be a harbor of safety and will have a sharp spike higher,” he said.
The markets are carefully watching whether or not the U.S. President Donald Trump will pull out of Iran’s 2015 nuclear deal, which was agreed upon between the U.K., China, Russia, France, Germany and the U.S.
Reuters cited two White House officials familiar with the matter as saying on Wednesday that Trump “has all but decided to withdraw” from the deal.
Earlier, Trump gave May 12 as the deadline to the U.K., Germany, and France to fix some “flawed” elements of the agreement, including Iran’s ballistic missile program. If not addressed, Trump is likely to reinstate U.S. sanctions against Iran.
In the meantime, Iran’s foreign minister spoke on Thursday, saying that the May 12 deadline is unacceptable.
“Iran will not renegotiate what was agreed years ago and has been implemented,” Foreign Minister Mohammad Javad Zarif said in a YouTube post. “To put it in real estate terms, when you buy a house and move your family in, or demolish it to build a skyscraper, you cannot come back two years later and renegotiate the price.”
Gold prices were trading flat as Asian markets opened on Friday, with spot gold on Kitco.com last at $1,313.00, up 0.10% on the day.