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XAUUSD - Surges to Six Year High Near $1590 on US-Iran Tensions



XAUUSD - Surges to Six Year High Near 1590 on US-Iran Tensions
In the last week gold has surged very strongly to its highest level in nearly seven years just shy of $1590, as it has exploded through the key $1500 level. It has eased a little in the last 24 hours trading in a narrow range as some relief selling is to be expected as people take some profits. 

Prior to the surge higher, gold had moved very little trading right around the $1475 level, as it remained in a narrow range trading roughly between $1460 and $1480, where it has spent the best part of the last few weeks. It had spent this time consolidating after dropping sharply back through the key $1500 level to a three month low below $1450.

For the prior two months gold had settled around the current key $1500 level, moving back and forth around this level, seemingly content to not move anywhere else, so this level is highly likely to provide some support should gold fall back that far in the near future. It is however likely to find some support at levels above $1500 should it decline. In the first week of September gold fell sharply from its multi year highs above $1550 down back below the $1500 level in the first of several iterations of that price action.

At the start of August, gold surged higher off support at $1400 towards the recent six year high above $1530, before its more recent surge higher yet again. It was well supported by the $1400 level throughout July, and any time it moved lower, it was quickly bought up and supported, pushing it back above this level, which means at some point in the future, this level may also prop up gold.

Recent tension between the United States and Iran has sent gold surging higher as investors have returned to the safe haven asset.  Gold had recently been well supported by a range of factors including weak economic growth, rising inflation expectations and a weaker US dollar.  There are also the overriding concerns over global growth, as last month the United States recorded its biggest contraction in manufacturing activity since June 2009.  Back to the Iran situation, gold received a boost after United States President Donald Trump authorized the killing of Iran’s top general, Qasem Soleimani.  Equity markets fell sharply afterwards, as Iran promised to retaliate against the United States.  If they do retaliate, then equities will likely fall further while safe haven assets will see more interest.  Given the possible threat to oil installations, Goldman Sachs commodity strategists have suggested that currently gold is a stronger hedge than oil for investors seeking safe returns amid the escalation of tensions.

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This post was written by Graeme Watkins

CEO Valutrades Limited, Graeme Watkins is an FX and CFD market veteran with more than 10 years experience. Key roles include management, senior systems and controls, sales, project management and operations. Graeme has help significant roles for both brokerages and technology platforms.