Escalation of Middle East conflict pushes gold and oil prices higher amid rising risk aversion.

Geopolitical Tensions Rise,Small futures trading platform Gold Prices Soar Again

On Thursday (June 13) during the early Asian market session, the spot gold price continued its recent surge. Influenced by reports of an Israeli airstrike on Iran, the gold price surged by 1.4%, reaching a new high for the week at $3424.79 per ounce, just shy of the historic peak of $3500.10 set in April. In the previous two days, gold prices had steadily climbed due to mild inflation data and growing market risk aversion.

Since reaching a new high in April, gold prices have mostly fluctuated between $3187 and $3399. The current breakthrough is driven by the worsening situation in the Middle East and expectations of a Federal Reserve interest rate cut.

Rising Risk Aversion, Middle East Tensions Spark Gold Buying

Saxo Bank strategist Chanana noted that the Israeli raid has heightened market fears of possible Iranian retaliation, particularly potential attacks on US military bases, making investors more inclined to allocate assets like gold. She emphasized: "The hedging function of gold reflects not only geopolitical risks but also the spillover effects of inflation and financial market volatility."

Kitco analyst Wagner, analyzing from a technical perspective, stated that gold prices are nearing historical closing highs, and a breakthrough of $3400 would be a crucial psychological and strategic milestone, likely attracting both institutional and retail investors to keep the momentum of the gold rally going.

Moderate US CPI, Rising Rate Cut Expectations Boost Gold Price

Aside from geopolitical factors, recent US inflation data also favors gold. The May CPI rose 0.1% month-on-month, with core CPI remaining steady, both below market expectations. Independent metals trader Tai Wong noted that this led to a decline in the dollar and US Treasury yields, thus boosting the performance of precious metals. Consequently, the market raised its bets on a Federal Reserve rate cut in September, with CME FedWatch data showing the probability has risen to 70%.

In the long term, the market generally believes that amid the gradual shift in Federal Reserve monetary policy and ongoing global political tensions, gold prices are likely to set new historical highs. Bank of America even predicts that gold prices may reach the $4000 mark by the end of this year or early 2026.

Oil Prices Soar Simultaneously, Re-evaluation of Risks in Oil Market

Alongside gold, international oil prices are also soaring. During Asia-Pacific trading hours, WTI crude surged 10.21% to $74.99 per barrel, while Brent crude rose by 10.29%, reaching $76.48 per barrel, marking the largest single-day increase in recent times.

MST Marquee's head of energy research, Kavanic, stated: "Previously, the oil market reacted moderately to geopolitical risks, but this attack reminds investors that the real threat of the Middle East situation is far more imminent than expected." He pointed out that the attack could worsen Iran-US relations and pose a threat to regional oil supply security.

Lipow Oil Associates president Lipow also warned that if Iran takes military retaliatory actions, including attacks on Israeli or US targets, it could trigger a large-scale conflict and disrupt oil supplies. He emphasized that if Middle Eastern oil-producing countries unite to block the Strait of Hormuz, oil prices might soar to $120~130 per barrel.

Market Outlook Filled with Uncertainty

Currently, the market is highly focused on whether Iran will retaliate and how the US and its allies will respond. Against this backdrop, the importance of gold and oil as key risk hedging tools is significantly enhanced. Although JPMorgan maintains its 2025 oil price benchmark prediction at $60 per barrel, it also warns that if the conflict escalates uncontrollably, oil prices could reach the highest level in nearly a decade.

Additionally, the Federal Reserve's June meeting and upcoming PPI data will be critical focal points for the market. If inflation remains moderate, further solidifying rate cut expectations, it may once again provide upward momentum for gold prices.

Risk Warning and Disclaimer

The market carries risks, and investment should be cautious. This article does not constitute personal investment advice and has not taken into account individual users' specific investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions in this article are suitable for their particular circumstances. Investing based on this is at one's own responsibility.

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