(Kitco News) - Chaos in the Middle East is fueling renewed safe-haven demand for gold, pushing prices above $3,400 an ounce and resulting in the highest weekly close on record.
Although gold prices have broken near-term resistance, analysts remain cautious about calling new all-time highs for the precious metal next week. While the ongoing conflict between Israel and Iran provides safe-haven support, rallies driven by geopolitical events have historically proven to be short-lived.
“An Israel/Iran conflict may sustain prices above $3,400, but won’t send them higher without further escalation,” said Ole Hansen, Head of Commodity Strategy at Saxo Bank. “We’ve seen many geopolitical events briefly lift prices over the past three years, but they’ve all struggled to maintain a sustained bid.”
Spot gold is poised to end the week at $3,434.12 an ounce, up 3.75% from last Friday. Gold is currently outperforming the U.S. dollar, which is struggling to attract safe-haven flows. The U.S. dollar index last traded at 98.13, down 1% from a week ago.
Michele Schneider, Chief Market Strategist at MarketGauge, said investors should expect some volatility next week as day traders take profits from the recent rally. However, she added that despite potential noise, both gold and silver remain in long-term uptrends.
“The [Middle East] story could trigger other issues—higher inflation and other nasty stuff,” she said. “So we may reach a peak, but I’m not banking on a top just yet.”
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, noted that gold investors appear to be taking a wait-and-see approach following Israel’s initial barrage of airstrikes on Friday.
Aslam emphasized the importance of monitoring oil prices and potential Iranian retaliation:
“If Iran retaliates forcefully—especially by threatening oil flows through the Strait of Hormuz—surging crude prices could trigger a sharp flight to safety, sending gold significantly higher as investors hedge against geopolitical chaos and inflation risk,” he said. “Conversely, if escalation remains limited and oil retreats, gold’s rally could fizzle as safe-haven demand unwinds. For now, gold traders should watch Brent above $80 as a litmus test for deeper turmoil—if oil stays elevated, gold could be poised for another leg up; if not, expect a swift pullback as tensions subside.”
Michael Brown, Senior Research Strategist at Pepperstone, said he remains bullish on gold, even if the current risk premium begins to fade. He noted that long-term structural factors still support higher prices.
“Overnight developments again highlight why gold deserves a place in portfolios as a hedge in today’s uncertain environment,” he said. “I still like bullion higher from here, particularly as reserve asset allocators continue to diversify their holdings.”
All Eyes on the Federal Reserve
While gold will continue to respond to geopolitical developments, market attention will also shift to the Federal Reserve, as Chair Jerome Powell speaks following next week’s monetary policy meeting.
Economists widely expect the Fed to leave interest rates unchanged. However, there is growing speculation that Powell may start laying the groundwork for rate cuts later this year.
The latest inflation data, coupled with signs of slowing momentum in the U.S. economy, give the Fed some room to ease monetary policy. Still, rising geopolitical uncertainty could prompt some market participants to temper their expectations.
“Should the Fed sound more dovish than expected following the latest inflation print, this could give gold bulls fresh confidence,” said Lukman Otunuga, Senior Market Analyst at FXTM. “Such a development could push prices past the all-time highs of $3,500, especially with ongoing geopolitical support. However, if the meeting has an overall hawkish tone and Powell expresses caution over future cuts, gold may lose some of its shine as investors scale back Fed cut bets.”
“Technically speaking, prices are bullish on the daily charts,” Otunuga added. “A solid weekly close above $3,430 may signal a move toward the all-time high at $3,500 and beyond. Weakness below $3,430 could drag gold back toward $3,400 and $3,360.”
Economic data to watch next week:
Monday: Empire State Manufacturing Survey, Bank of Japan monetary policy meeting
Tuesday: US Retail Sales
Wednesday: US weekly jobless claims, US housing starts, Federal Reserve monetary policy meeting
Thursday: US markets closed for Juneteenth, Swiss National Bank monetary policy meeting, Bank of England monetary policy meeting
Friday: Philly Fed Manufacturing Survey
