Gold 'Used as an ATM' as Epic Fury Crushes Stocks, Bond Prices

GOLD PRICES fell on Monday as crude oil surged above $100 per barrel for the first time in 4 years on the 10th day of the new Middle East conflict, writes Atsuko Whitehouse at BullionVault.

Global stock markets fell for the 5th trading session in 6 so far during this war after Tehran named Mojtaba Khamenei as Iran's new Supreme Leader, succeeding his father, and longer-term global borrowing costs hit multi-month highs as government bond prices also fell again.

The US Dollar, in contrast, hit a 3-month high, gaining almost 2.0% on its trade-weighted DXY Index since the US and Israel military operation against Iran started the weekend before last.

Gold priced in Dollars has now sunk 2.2% since Epic Fury began.

Comparing Epic Fury with recent geopolitical wars, the yellow metal dropped as much as 4.7% versus the Dollar during the first 2 weeks of the US-led invasion of Iraq in March 2003.

Last June's brief Midnight Hammer operations against Iran's nuclear programme saw gold fall as much as 2.9% within 5 sessions.

But gold rose sharply when Russia attempted an all-out invasion of Ukraine in February 2022, gaining 7.0% in the first 10 days and retouching what was then its all-time high from the 2020 Covid Crisis at $2070 per Troy ounce.

"In the medium term, gold is bought during times of crisis," says Jeff Toshima, former Tokyo director of the mining industry's World Gold Council and a regular columnist for Nikkei newspaper, noting how gold plunged amid the Lehman's Crash of late 2008.

"[But] gold tends to be sold for cash immediately after a crisis breaks out," Toshima adds, "as investors liquidate it to offset losses in other assets.

"This is why gold is often referred to as an ATM".

Investors last week liquidated the giant GLD gold ETF at the fastest pace since February 2021, shrinking it by 28 tonnes in the 5 sessions to Friday night's close.

Monday saw European bourses lose 2.2% on the Euro Stoxx 600 index after Japan's Nikkei 225 index plunged 5.2% and South Koria's Kospi sank 6.0%.

Both Asian nations rely on crude oil shipped through the now closed Strait of Hormuz, with approximately 95% of Japan's crude oil imports coming from the Middle East and 70% of South Korea's.

Spot gold prices today fell as much as 3.0% to $5016 per Troy ounce in global trading and storage hub London, before paring half of that loss to $5103 by lunchtime.

The price of silver, which finds nearly 60% of its annual demand from industrial uses, fell as much as 5.6% in early trading Monday, before paring most of that loss by London lunchtime.

US crude oil prices meantime jumped as much as 31.4% this morning to $119 per barrel before easing back near $100 after news that G7 finance ministers are discussing a possible joint release of petroleum from strategic reserves, co-ordinated by the International Energy Agency, in Monday's emergency meeting.

"If the new leader doesn't get approval from us, he's not going to last long," US President Donald Trump warned shortly before Khamenei's appointment at the weekend.

"[But] this is a signal that the Iranian regime in its current form has no inclination to compromise and that it intends to resist at all costs," says Sanam Vakil, Middle East director at UK think-tank Chatham House.