Gold futures surged to $4,748, marking an 18% gain over six months as hopes for a US-Iran deal grew. A weakening dollar and falling bond yields provided additional support. Analysts suggest a resolution to the conflict could propel prices toward $5,000, with Deutsche Bank citing de-dollarization trends for a long-term target of $8,000.
Gold futures extended recent gains, with prices reaching $4,748 on hopes of a US-Iran deal. The precious metal rose 3% on Thursday for its biggest daily advance since late March.
Falling energy prices weighed on bond yields, while the dollar fell to pre-war levels. Both factors acted as tailwinds for gold, which is priced in the US currency and does not offer interest.
The US is awaiting Iran’s response to a proposal to reopen the Strait of Hormuz. Analysts suggest that should a deal be reached, gold could reclaim $5,000 quickly.
Since the inception of the US/Israel-Iran war, gold has fallen by over 10%. The conflict reduced odds of an interest rate cut as surging oil prices risked raising inflation.
Gold tends to benefit from lower interest rates, as the opportunity cost of owning it is less. The metal has struggled but a rally appears near with hopes of the war ending.
Leading investment firms are becoming bullish again on the precious metals market. Deutsche Bank predicts the XAU/USD index could breach $8,000 over de-dollarization.
The bank wrote in a note that emerging economies are increasingly diversifying central bank reserves by sidelining the US dollar. Developing countries added over 225 million troy ounces of gold since 2008, highlighting that de-dollarization will push prices higher.
Countries such as China, Russia, India, Poland, and Turkey remain the biggest buyers. Saudi Arabia, Qatar, the UAE, Egypt, and Kazakhstan are also significant accumulators.
Deutsche Bank emphasized that countries in Eastern Europe and the Middle East are significantly increasing gold reserves. This accumulation could boom more after the US-Iran war ends, potentially sending gold futures toward $8,000.
