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Gold prices extend gains after Trump tweet on Iran

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(Kitco News) Gold futures got an extra boost Wednesday when U.S. President Donald Trump went on Twitter to tell the U.S. Navy to "shoot down and destroy" any Iranian gunboats that harass American ships in the Middle East.

Other factors that are also aiding the precious metal include the stronger tone in equities, softer U.S. dollar and gold’s ability to bounce from chart support after Tuesday’s decline, analysts said.

Gold was stronger overnight. Then after Trump’s early-morning tweet, the metal accelerated to the upside. As of 10:01 a.m. EDT, Comex June gold was $43.30 higher to $1,731.10 an ounce.

Increased geopolitical tensions often prompt investors to buy gold as a safe haven.

“The reason for the recent spike was a Donald Trump tweet about Iran,” said Phil Flynn, senior market analyst with at Price Futures Group. “Apparently in recent days, Iran has been playing cat-and-mouse games with U.S. boats. Donald Trump gave orders to shoot at will basically.”

The Associated Press reported that a Navy video last week showed small Iranian boats came close to U.S. warships in the northern Persian Gulf near Kuwait. Tensions were not helped any when Iran’s Revolutionary Guard said it has put the country’s first military satellite into orbit, raising concerns about whether the technology could be used for military purposes.

“I have instructed the United States Navy to shoot down and destroy any and all Iranian gunboats if they harass our ships at sea,” Trump tweeted.

Charlie Nedoss, senior market strategist with LaSalle Futures Group, also commented that Trump’s tweet boosted gold, which already held a test of chart support on Tuesday. Further, Nedoss pointed out that the U.S. dollar is softer, which tends to help gold due to their inverse relationship.

It’s hard to gauge the likelihood of a military confrontation as a result of Trump’s tweet, he said. Nevertheless, the gold market took notice.

“Let’s put it this way – we’ve been lacking any kind of geopolitical story,” Nedoss said. “That’s giving you one.”

Ahead of the tweet, stock-index futures were higher, which helped gold since otherwise the metal has often sold off in risk-off environments when some market participants have had to sell the metal and other assets to raise cash, Flynn said.

“We had a big asset contraction yesterday, and gold got caught up in it,” Flynn said about the Tuesday decline. “But a day later, the stock market looks a little better.

“There is a realization that the fundamentals for gold are still solidly bullish, with money printing going on around the globe and historically low interest rates. And now you’re adding in a touch of geopolitical risk...that has people going back for a safe-haven play.”

Alex Turro, senior market strategist with RJO Futures, also said improved risk sentiment is helping gold, with crude oil also moving higher. He added that gold may have been oversold on Tuesday’s decline.

Nedoss said he looks for gold to test $1,800. Turro listed a medium-term target of $1,900 to $2,000, commenting that any further move lower in real yields would help gold move higher.

“I was encouraged we came down and hit the moving averages [and then bounced] yesterday,” Nedoss said. “I’d like to see more of a steady-Eddie run though when it runs, rather than this $40 on the day. But I’ll take it.”

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