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Gold prices boosted by growing geopolitical tensions, above $1,350/oz

London — Gold was well and truly firing on all cylinders Friday, trading above $1,350/oz and bolstered by escalating concerns in the Middle East and global economic uncertainty.

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Gold prices rallied following the alleged attacks on two oil tankers near the Strait of Hormuz Thursday. US Secretary of State Mike Pompeo on Thursday blamed Iran for the attack on the two tankers, as well as attacks a month earlier on pipelines in Saudi Arabia and on ships in waters near Fujairah.

Spot gold was quoted at roughly $1,353/oz Friday. The LBMA Gold Price, operated by ICE Benchmark Administration, settled Thursday afternoon at $1,335.90/oz.

"The market had mainly moved on from the Middle East after President Trump publicly insisted that he did not want war with Iran and reignited trade war concerns with his tariff tweets," RBC told clients. "However, we believe that escalation will likely be the order of the day as long as the United States continues its 'maximum pressure' policy and insists that Iran completely abandon its revolutionary agenda in order to receive economic relief."

Gold historically acts as a safe haven for traders to park their money in times of fear and uncertainty.

"With slowing economic growth, geopolitical risks and a likely Fed rate cut, we see investor demand for gold picking up," ANZ told clients.

"The sector may be vulnerable to brief pullbacks, as investors lock in profits."

BMO said gold's break above $1,350/oz is the first time since April 2018, putting the move down to increased geopolitical tensions.

"Holdings of gold-backed physical ETFs also rose to the highest level in four months. With a Federal Reserve rate cut cycle looking imminent, we expect precious metals to be well-supported over the coming quarter," BMO analyst Colin Hamilton said. "Moreover, with the dollar still relatively strong, this is leading to very high prices in many producer currencies."

Standard Chartered said it believes continued tariff tit-for-tat will also continue to buoy gold prices.

"We expect the Fed to cut rates by 25 basis points in July, and again in December barring positive data surprises," said Standard Chartered analyst Suki Cooper. "Our US economists believe that the FOMC is concerned that trade tensions with major US partners could persist and continue to dampen sentiment and real activity."

-- Ben Kilbey, ben.kilbey@spglobal.com

-- Edited by Jonathan Fox, newsdesk@spglobal.com