The US bombed three Iranian nuclear sites on Saturday night, marking the most significant escalation of military action against Iran seen in decades.
- President Trump ‘obliterates’ Iranian nuclear sites
- Iran warns of quick response
- Gold remains underpinned and looks set to move higher
The US enters the Israel-Iran conflict
President Trump announced Saturday that the US had “successfully” struck three Iranian nuclear sites – Fordow, Natanz, and Isfahan – as the US escalated its involvement in the Israel/Iran conflict.
President Trump warned that Iran must now ‘make peace’ or face further damaging strikes, a call that is likely to be ignored by Iran. Further escalation in the conflict over the near future is likely, with Iran warning the US to expect ‘regrettable responses’, adding to fears of attacks on US military bases in the region.
Financial markets response measured, so far
Financial markets have seemingly taken this weekend’s action in their stride with risk assets quiet at the start of the week. The VIX, a closely watched indicator of risk, has barely moved, oil has pared its opening gains despite fears that Iran may try and close the Strait of Hormuz, while gold trades on either side of Friday’s closing level.
Any further escalation in the Middle East however will see risk markets sell-off, benefitting traditional safe haven assets including the Swiss Franc and gold.
Gold’s safe haven status reinforced
Gold remains within touching distance of its mid-April all-time high as the precious metal continues to prove its value as a safe haven asset during times of turmoil. Spot gold is up over 26% since the start of the year and this weekend’s escalation in the Middle East conflict will add to the precious metal’s allure.
Gold has outperformed a range of other financial markets since the turn of the year, while silver’s recent outperformance is also notable.
Chart using TradingView
With Middle East tensions now at critical levels and with Iran promising retaliation, gold appears well-positioned for further upside as investors seek protection against escalating geopolitical risks and potential global economic disruption.
