Gold rushes above $2400 as Israel attacks Iran

Gold prices rose in European trade on Friday, extending gains for a second day and trading above $2400 once more near record highs amid a new flux of haven demand after Israel attacked Iranian soil.

The precious metal is heading for the fifth weekly profit in a row even as the odds of a Fed interest rate cut in the summer declines following strong US data and bullish remarks by Fed officials. 

Prices 

Gold prices rose 1.6% to $2417 an ounce, with a session-low at $2373.

Gold prices rose 0.8% on Thursday, resuming gains and approaching record highs at $2431. 

Israel Strikes Iran

The NBC network reported that Israel executed a military strike against Iran, with Iranian media reporting explosions near the Isfahan airport. 

Multiple air courses were rerouted above Iran earlier on Friday. 

Bloomberg reported that Israel notified the US yesterday of a plan to respond militarily to Iran in the next 24 to 48 hours. 

The NBC reporting indicated the US hasn’t joined the strike. 

Iranian TV said the air defense system shot multiple drones in Isfahan early Friday.

Western reports indicated that Iranian nuclear sites weren’t aimed at by the Israeli strikes. 

The New York Times reported that Israel officially stands behind the attack on Iran today. 

Weekly Trades 

Gold prices are up 3% this week, on track for the fifth weekly profit in a row, the longest such streak of weekly gains since December 2022. 

Strong Data

Recent US retail sales data blew past estimates, indicating strong growth in the first quarter.

Such data cast doubts about the timing of the next Federal Reserve interest rate cut, especially after strong employment and consumer prices data. 

Bullish Remarks 

Fed Chair Jerome Powell said in a symposium earlier this week that inflation has stiffened and held its place during the first quarter, raising doubts about the prospects of interest rate cuts in 2024.

Powell added that it’s clear that recent inflation data didn’t give the Fed enough confidence that inflation is heading towards the target, and it could take longer than expected.

The New York Fed President said he doesn’t expect a rate hike at all, but it remains possible.  

Atlanta Fed President Raphael Bostic said he supports maintaining interest rates unchanged, and he doesn’t believe it’ll be suitable to cut interest rates until the end of the year. 

US Rates

The odds of a June Fed interest rate cut fell from 32% to 18%, while the odds of such a cut in July tumbled to 44%.

Investors now barely expect two interest rate cuts this year by the Fed, instead of the previously estimated three. 

Gold Performance Forecast

Capital.com’s analysts said the news about Israeli attacks against Iran today threaten a wide-scale conflict in the Middle East, in turn boosting gold prices. 

They said the markets remain on edge to get more information about the type and timing of the attack. 

The SPDR 

Gold holdings at the SPDR Gold Trust remained flat yesterday at 827.59 tonnes, a week low.