January 5, 2016
soared $11.80 today as the geopolitical situation between Iran and Saudi Arabia continued to escalate and Chinese equity markets halted trading after PMI missed forecasts. Gold is trading at 1072.00. Gold was bolstered by safe-haven bids following rising geopolitical tensions in the Middle East that knocked equities and the dollar lower.
Saudi Arabia cut ties with Iran on Sunday, responding to the storming of its embassy in Tehran in an escalating row between the rival Middle East powers over Riyadh’s execution of a Shi’ite Muslim cleric. Iran’s top leader, Ayatollah Ali Khamenei, predicted “divine vengeance” for the execution of Sheikh Nimr al-Nimr, an outspoken opponent of the ruling Al Saudi family.
Asian shares and currencies fell on Monday due to tensions in the Middle East and soft Chinese data. The dollar fell to a 10-week low against the yen, also seen as a safe haven. A weaker dollar makes gold cheaper for holders of other currencies.
Oil gained about 2 percent on Monday due to the fallout in the Middle East. Higher oil prices support bullion, as gold is seen as a hedge against oil-led inflation. Investors bet on gold as an alternative investment during times of geopolitical and financial uncertainties, though safe-haven rallies typically tend to be short-lived.