Gold price surges as investors assess Mid-east risk

GOLD prices shot to almost seven-year highs on Monday while yields on US Treasury and euro zone government debt fell as escalating US-Iranian tensions spurred demand for safe-haven assets.
A gauge of global equity markets fell.
Oil rose and the dollar weakened after the US killing last week of General Qassem Soleimani, the architect of Iran’s drive to extend its influence across the Middle East, raised concerns around the globe that a broader regional conflict could erupt.
Iran’s supreme leader wept in grief with thousands of mourners thronging Tehran’s streets for Soleimani’s funeral, and the slain military commander’s successor vowed to expel US forces from the region in revenge.
MSCI’s gauge of stocks across the globe shed 0.31 percent, while European shares extended losses. The pan-European STOXX 600 index lost 0.45 percent.
On Wall Street, the Nasdaq turned positive, a sign investors were taking a cautious approach.
Investors have withstood the recovery from the 9/11 attacks in 2001 and the financial crisis a decade ago, making it easier to take in stride lesser events, chief global strategist at JPMorgan Asset Management, David Kelly said.
“This is a case that the market is probably under-reacting to a threat because we don’t know what the Iranians may do to retaliate and we don’t know how the US administration may respond,” he said.
“However, it is important not to get lulled into complacency because there is some additional risk in the equity market after Soleimani’s death and rather high stock valuations”, Kelly noted.
“In the past if you have a big increase in uncertainty, the market sells off first and asks questions later. We’re in a different situation now,” he said.
Emerging market stocks lost 0.99 percent, while earlier in Asia, China’s blue-chip CSI300 index .CSI300 ended 0.4 percent lower and Tokyo’s Nikkei average .N225 fell 1.91 percent to a one-month low.
Adding to tensions, Iran also said it was taking another step back from its commitments under a 2015 nuclear deal with six powers that Washington withdrew from in 2018.
Spot gold XAU= rose 2 percent to $1,582.59 an ounce as of 13:20 GMT, putting it on course for its biggest one-day jump in more than four months.
The Swiss franc rose against the dollar on worries about a broader escalation of Mideast conflict and the safe-haven Japanese yen surged to a three-month high before weakening against the greenback.
Edward Moya, senior market analyst at OANDA in New York, said the market is still digesting the implications.
“We’re having a little softness in the dollar against safe-haven currencies, but I think risk appetite will return. If Iran does retaliate, they know they’re toast,” Moya said.
The dollar index fell 0.15 percent, with the euro EUR= up 0.25 percent to $1.1186.
The Treasury yield curve was flatter as the heightened US-Iranian tensions boosted demand for safe-haven assets.
The yield on the benchmark 10-year US Treasury note has fallen about 5.36 percent since the close on 2 January, just before an overnight US air strike in Baghdad killed Soleimani.
Oil prices jumped by about 1 percent on Monday, pushing Brent above $70 a barrel, as rhetoric from the United States, Iran and Iraq fanned tensions in the Middle East.
Brent crude futures soared to a high of $70.74 a barrel and later were at $69.91, up 31 cents from Friday’s settlement.
US West Texas Intermediate crude was up 1 cent at $63.06 a barrel.