Gold prices soared to their highest heights in more than five months. This increase occurs as geopolitical tensions are on knife’s edge after Israel’s lightning raids against Iran’s military assets. In fact, during Asian trading hours on Friday, gold got close to flirting with that $3,450 plateau. As they reacted to a depressive tide of risk aversion, investors rushed towards safe-haven assets.
On the very same day, Israel acknowledged responsibility for its attacks on Iran’s nuclear sites, sending shockwaves through international economies. The impact of the attacks deepened fears about the entire Middle East’s stability, which further increased risk aversion among investors. Gold has turned into an increasingly popular hedge and investment. This movement is a manifestation of its long-held role as a safe harbor in times of crisis.
The subsequent effects of these geopolitical advances hit other currencies’ markets just as hard, too. The British Pound GBP/USD, -1.72% plunged through the 1.3550 support. It found an anchor at 1.3530 in the opening European session on Friday. The Pound is crashing. This decline is due to a very strong risk-off sentiment amid currently escalating regional conflicts.
In like manner, the Euro (EUR/USD) responded to the risky mood, falling below 1.1550 and ending its four-day win streak. The Euro 1.1631 high is the highest level since Oct 2021. Yet, it was trading close to 1.1530 during the Asian hours on Friday, indicating that investor confidence remains on a knife edge.
Market commentators noted an unusually clear correlation between increasing gold prices and the decreasing values of the Pound and the Euro. This relationship is a direct result of today’s stark geopolitical crisis. Traders are unwinding positions in response to the situation’s possible economic fallout. This major policy shift is creating a tsunami of demand for gold as a portfolio hedge and insurance policy.
Unless we take an extraordinary measure, tariffs will remain overly punitive high until 2025. Even as legal challenges threaten to unravel all the IEEPA tariffs, U.S. trade policy is stronger than ever. This strong line in the sand may serve to further muddy an already tempestuous market atmosphere. Beyond that, the bill would affect currency exchange rates and commodity price.