Israel Strikes, Gold Spikes!

As Israeli jets bombed Iranian nuclear installations, gold surged on June 13, the latest case of investors rushing to protect assets with the ultimate safe haven. Gold climbed 1.5 percent, rising above the $3,450 level. By comparison, the U.S. dollar, also considered a safe haven, had a far more modest reaction, inching up just one-quarter of a percent, as measured by the ICE U.S. Dollar Index, which tracks the dollar against a basket of major currencies. (Foreign investors exchange into dollars when they purchase U.S. Treasury bonds.)

“Don’t look to US Treasuries for “safe haven”/flight to quality” flows,” wrote Mohamed El-Erian, the former Chief Executive Officer of investment firm PIMCO and President of Queen’s College, Cambridge University. “Instead, watch the price of gold and silver.”

The surprise Israeli attack against Iran appeared to be the opening salvo in a sustained campaign to destroy Iran’s ability to build lethal nuclear weapons. As Israeli Prime Minister Benjamin Netanyahu warned the military operation would last “as many days as it takes,”  the U.S. was positioning warships to protect Israel and American forces from an Iranian response, raising the prospects of a widening war that could drive gold to new heights.

“Israel knocking out Iranian targets is causing a little bit of geopolitical scare in the market. Prices will stay elevated in the anticipation of what is to come, the retaliation by Iran,” Daniel Pavilonis, senior market strategist at RJO Futures told Reuters news service.

Since 1984, the United States has designated Iran a state sponsor of terrorism.

“I think it’s been excellent,” President Trump told ABC News. “And there’s more to come, a lot more.”

The safe haven move to gold pushed the precious metal’s gain for the past 12 months to 49 percent.

“Gold is probably the best thing that we added to our portfolios in the middle of last year,” Mark Andersen, co-head of global asset allocation at UBS told Bloomberg TV. “It’s both helping us when we see rising tensions in the Middle East like today, but also weighing against debt fears, inflation fears, etc.”