Gold consolidated near a two-week high today and is set for the first back to back weekly advance since April, as concerns that a U.S. recovery may be stalling and geopolitical risks in the Middle East led to safe haven demand.
Gold is 1.6% higher this week, after rising 0.3% last week. Silver is also poised for the second week of gains. In the physical gold market, premiums on gold bars are quoted at 80 cents to $1.20 an ounce in Singapore and Hong Kong.
The unrest in Iraq drove oil to an eight-month high and sent stocks tumbling globally. U.S. crude touched an intraday high of $107.68, and was up 75 cents at $107.28, extending the previous session’s $2.13 gain on concerns about oil supplies.
After a long period of consolidation, oil prices look like they could be on the verge of breaking out of their range and moving higher.
The combination of poor economic data along with the risk of war in Iraq could be the catalyst that gold needs to get out of its recent funk.
Gold bullion has increased 6% this year in part as tension between Russia and the U.S. and EU led to some haven demand. Developments in the Middle East are likely to deepen geopolitical tensions between Russia and the West and this should support gold and indeed lead to higher gold prices in the coming months.
There is still the potential for a wider Middle East conflict as the region remains a ‘powder keg.’ Iraq may be the match that sees the region explode into chaos and war – with attendant effects on global oil prices and the global economy.
Source Gold Core
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