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Gold prices edge higher as US-Iran tensions persist

Bengaluru

GOLD prices erased early losses and inched up on Tuesday, as fears of a widespread conflict between the United States and Iran persisted, while palladium scaled a new high.

Spot gold rose 0.2 per cent to US$1,569.27 per ounce by 0741 GMT after falling as much as 0.7 per cent earlier in the session, its biggest daily percentage decline in about a month.

In the previous session, prices had touched US$1,582.59, their highest since April 2013. US gold futures edged 0.2 per cent higher to US$1,571.10.

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Warnings of new strikes and retaliation by both the US and Iran stoked concerns about a broader Middle East conflict. "There's no escalation in the geopolitical situation, but the tensions have not receded completely and because of that after a good correction in gold, prices have bounced," said Jigar Trivedi, a commodities analyst at Anand Rathi Shares & Stock Brokers in Mumbai.

The sentiment was also boosted after the US denied a visa to Iranian Foreign Minister Mohammad Javad Zarif that would have let him attend a United Nations Security Council meeting in New York on Thursday.

Gold, considered a safe asset in times of political and economic uncertainty, had jumped in the last two sessions on concerns of a wider escalation after a US air strike killed Iran's top military commander Qassem Soleimani last week.

Markets were also worried about conflicting reports about American military repositioning troops in preparation for leaving Iraq. "If things de-escalate (with Iran), then gold will hit lower quite quickly. We would see it go down below US$1,500," said Jeffrey Halley, a senior market analyst for the Asia-Pacific region at OANDA.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.10 per cent to 896.18 tonnes on Monday, their highest since Nov 27.

"Elevated geopolitical risks across the heart of the Middle East should support a stronger gold price environment this winter," Citigroup Inc. analysts including Tracy Liao wrote in a note. Prices may top US$1,625 this quarter, but then normalise between US$1,500-1,600, depending on events, they said.

"Recent events in the Middle East have further boosted retail and institutional inflows across bullion futures, options and ETFs," Citi said, adding that gold had finished 2019 on a bullish note. And while the bank cautioned that it's difficult to trade gold purely from the angle of heightened military tensions, there are "bullish fundamental tailwinds" in place. REUTERS, BLOOMBERG