Gold price surge after Iran attack could fade, Pepperstone says

A spike in gold prices following U.S. and Israeli attacks on Iran may wane as markets attempt to gauge the financial market fallout from the widening conflict, according to analysts at Pepperstone.

Gold prices jumped as investors rushed into safe-haven assets in the midst of the attacks which led to the death of Iran’s Supreme Leader Ayatollah Ali Khamenei. The killing of Iran’s most powerful figure raised fears of a broader regional conflict and potential disruption to oil shipments through the Strait of Hormuz, a critical global energy artery.

Spot gold rose 2.2% to $5,395.25 an ounce by 03:44 ET, hovering around the key $5,400 level. Meanwhile, U.S. Gold Futures climbed 3.1% to $5,411.56 an ounce.

In a note, the Pepperstone strategists including Michael Brown suggested that it would not be surprising "to see some degree of any initial spike higher fade as trade progresses."

"Markets are notoriously terrible at accurately pricing geopolitical risk, with participants tending to flip to an extreme view, before more rational heads slowly but surely prevail," Brown said. 

However, the developments in Iran have reinforced the "fundamental bull case" for gold, Brown added, arguing that the yellow metal will "remain the beneficiary of haven inflows in an increasingly uncertain world, with hefty retail and reserve demand both providing tailwinds too."

Brown said he would "certainly not rule out" a further climb in gold towards the $6,000 an ounce mark by the end of the year, although he flagged that "as with all these things we’re unlikely to get there in a straight line."

Away from geopolitics, a busy week of economic data and earnings awaited investors. Along with the February U.S. jobs report, retruns from Broadcom and Target are due out during the first week of March.