By Joe Wallace and Amrith Ramkumar 

Gold jumped to its highest level in almost seven years with tensions between the U.S. and Iran escalating, the latest example of investors favoring the safe-haven metal to protect against a market downturn.

A recent advance for bullion extends a booming rally that began last year, when uncertainty about global trade policy and fears about an economic slowdown propelled gold to its best annual performance since 2010. The gains have been a boon for investors who watched the climb in gold lose momentum briefly in the fourth quarter before resuming again in late December. Producers such as Newmont Goldcorp and Barrick Gold Corp. have also benefited.

Monday's rise came after President Trump reiterated his threat to strike Iranian cultural sites if tensions between the two countries escalate and as traders awaited Tehran's response to the death of Maj. Gen. Qassem Soleimani. The targeted killing last week raised fears of a broader conflict between the U.S. and Iran, adding fuel to the gold rally.

"The move that we've seen in the past few days is clearly related to the escalation in the Middle East," said Norbert Rucker, head of economics at Swiss private bank Julius Baer. "The attack sent some tremors that were felt beyond the oil market itself and resulted in a flight to safety, which is exactly what we've seen in the gold market."

Front-month futures for January delivery rose 1.1% to $1,566.20 a troy ounce on the Comex division of the New York Mercantile Exchange Monday, recording their highest close since April 2013 and eclipsing their peak from early September. Prices have risen more than 7% in the past month alone and are up 23% from a low hit last year.

In another sign of upbeat momentum, gold climbed for the ninth consecutive session, its longest such streak since Jan. 5, 2018. Back then, a weakening dollar propelled the metal higher for 11 days in a row by making the metal cheaper for overseas buyers.

A softening dollar has supported gold again recently with some analysts expecting momentum in the world economy to shift overseas from the U.S. The WSJ Dollar Index, which tracks the U.S. currency against a basket of 16 other currencies, closed at its lowest level since March last week.

The dollar's recent slide has bolstered already-steady gold demand. Jeffrey Currie, head of commodities research at Goldman Sachs, noted that the metal performed well at the start of both Gulf Wars and following the Sept. 11 attacks in 2001.

Hedge funds and other speculative investors are positioned for further gains. They increased net bets on rising gold prices for the third consecutive week and pushed net bullish bets to their highest point since late September during the week ended Dec. 31, Commodity Futures Trading Commission figures show.

Gold has also benefited from a drop in government-bond yields around the world in recent months. Lower yields make it less likely that investors will miss out on outsize returns by owning bonds as a safe asset rather than gold. On Monday, the yield on the benchmark 10-year U.S. Treasury closed at 1.809%, down from 1.909% at the end of 2019. Yields fall as prices rise.

Shares of many precious-metals miners advanced Monday, with Newmont Goldcorp rallying 1% after the company said it is raising its quarterly dividend paid to shareholders to 25 cents from 14 cents previously. Mining stocks have gotten a boost from a broad rise in precious metals. Silver prices stand at a three-month high.

As well as buying futures and mining shares, one of the most popular ways to invest in gold is through exchange-traded funds. After Gen. Soleimani's killing, more than $56 million flowed into the iShares Gold Trust ETF on Friday, according to FactSet.

Wenyu Yao, a metals strategist at ING, expects investors to plow more money into gold-backed ETFs in the coming days as traders return to work following the New Year break.

Other gold-market observers and participants caution that gold prices are unlikely to rise much further. "The market is really long," said Georgette Boele, a strategist at ABN Amro, adding that investors are likely to sell the metal to capture profits from the recent rise in prices.

Write to Joe Wallace at Joe.Wallace@wsj.com and Amrith Ramkumar at amrith.ramkumar@wsj.com

 

(END) Dow Jones Newswires

January 06, 2020 17:07 ET (22:07 GMT)

Copyright (c) 2020 Dow Jones & Company, Inc.
Barrick Gold (TSX:ABX)
Historical Stock Chart
From Jun 2020 to Jul 2020 Click Here for more Barrick Gold Charts.
Barrick Gold (TSX:ABX)
Historical Stock Chart
From Jul 2019 to Jul 2020 Click Here for more Barrick Gold Charts.