Gold shed more than one per cent overnight after vaulting above the $US1,600 level for the first time in nearly seven years after US President Donald Trump’s comments eased fears of a larger conflict with Iran.
Spot gold dropped nearly one per cent to $US1,559.22 per ounce. Prices had earlier soared to $US1,610.90 in the session, their highest level since March 2013. US gold futures settled 0.9 per cent lower at $US1,560.20.
Trump said Iranian missile strikes on bases in Iraq had not harmed any US troops, and that Tehran appeared to be standing down.
Earlier in the session gold jumped as much as 2.4 per cent after Iran retaliated to a US drone strike that killed an Iranian military commander last week. The US attack led to fears of a new war in the Middle East.
“Expectations are that we’re not going to see a war, so you might see some softness. The rest of the catalysts remain in place for gold,” said Edward Moya, a senior market analyst at OANDA.
“We could see some weakness down to $US1,550, but in the end we are likely to see prices continue to march higher to $US1,640 in the short term.”
However, with no casualties after the strike and tweets from Iranian officials stating that Tehran did not want a war and that its strikes “concluded” its response to Friday’s killing, concerns of conflict in the region ebbed, dampening demand for safe-haven gold.
Gold is a preferred asset during times of political and economic uncertainty.
“Although the hostilities seem to be over – at least for now – the situation could easily re-escalate in fairly short order,” said Edward Meir, analyst at ED&F Man Capital Markets.
The geopolitical and economic drivers which impacted gold prices in 2019 – including US-China trade tensions, Brexit and the US Federal Reserve’s monetary policy – would continue into 2020, the World Gold Council said in a note.
Investors also kept a close eye on economic data from the United States. Data showed US private payrolls surged in December, weighing on the metal.
Meanwhile, palladium extended its rally, undaunted by most market events driving other precious metals. Prices were up 2.6 per cent at $US2,104.95, close to the all-time high of $US2,108.81 notched earlier in the session.
Platinum eased 1.4 per cent to $US957.02 an ounce, while silver shed 1.3 per cent to $US18.15. Silver prices had earlier notched a four-month high of $US18.85.