Gold Extends Rally as Oil Hits Fresh Iran War Highs as Conflict Worsens

GOLD PRICES rallied further on Monday as crude oil hit fresh 4-year highs after US President Donald Trump said he wants to "take the oil in Iran" and threatened to destroy its domestic energy infrastructure "if for any reason a deal is not reached shortly," writes Atsuko Whitehouse at BullionVault.

Spot gold prices for London settlement rose as much as 1.5% to $4573 per ounce Monday lunchtime, extending the rebound on Friday which erased what remained of last week's steep gold price plunge.

The 'safe haven' precious metal has still fallen 12.4% so far since the US-Israel 'Epic Fury' operation began. That marks gold's biggest monthly decline since the spring 2013 gold price crash.

Crude oil meanwhile rose as much as 3.0% per barrel of global benchmark Brent today, reaching its highest level at $116 since Russia began its invasion of Ukraine in February 2022.

That put crude oil on track for its second biggest monthly gain on record, with the 48.9% rise during 'Epic Fury' so far beating the 44.5% and then 47.5% moves of August and September 1990 after Saddam Hussein's Iraq invaded Kuwait, leading to the first Gulf War.

That still lags the Covid Crash rebound of 88.6% made in May 2020.

"Gold recorded its first weekly gain since the conflict started," says a note from derivatives platform Saxo Bank's commodity strategist Ole Hansen.

"The ability to rise together with crude prices [is] signalling a potential shift in investor focus away from rising inflation fears to the global economic fallout from the war.

"[It] increasingly carries the risk of gold-supportive period of stagflation."

Saudi Arabia's East-West crude oil pipeline is operating at full capacity of 7 million barrels per day, enabling tankers to use the Red Sea and bypass the Strait of Hormuz, now closed by Iran, between the Arabian and Oman Gulfs.

But Iran-backed Houthis in Yemen − whose weapons are in range of western Saudi Arabia − on Saturday joined the war, launching ballistic missiles at Israel after US-Israel strikes on Iranian nuclear facilities.

Iran-backed militia using Iraq as a launchpad to attack its Arab neighbors meanwhile threaten to open a second regional conflict, according to Al Jazeera, triggering "an unprecedented diplomatic crisis."

Israel today struck a checkpoint run by the Lebanese army − as yet not involved in the Israeli-Hezbollah conflict − killing at least one soldier.

Tehran also struck aluminium producers in Bahrain and the United Arab Emirates, along with a US military base in Saudi Arabia.

Aluminium contracts on the London Metal Exchange climbed over 5% by Monday lunchtime, and industrially-useful precious metal silver rose as much as 5.6% to $71.62 per Troy ounce.

However, silver prices have still fallen 20.4% since the start of this Middle East conflict.

"The breadth and duration of the conflict are very uncertain, but a prolonged period of higher energy prices will add markedly to business costs and raise consumer price inflation, with adverse consequences for growth," the OECD predicted in its latest interim economic outlook.