Could Gold Reach $4000 Amid the Rising Threat of War?

In this current macroeconomic and geopolitical landscape where we are at the precipice of witnessing an all-out war between Iran and Israel, gold continues to hold near historical highs which is no surprise. Could gold break out and surge to US$4000 oz?

We saw an immediate spike in price action for gold with the initial attack on Iran from Israel. Investors rushed to gold with the knowledge that an escalation between the two countries would not only disrupt financial, energy and commodities markets, but that gold prices would continue to climb with the current level of fear and uncertainty.

From a technical analysis perspective, gold has spent weeks ranging just under its recent all-time highs, finding resistance around $US3400. We have broken this resistance in recent days, setting gold’s price chart up for a new breakout to more upside price action.

As we watch both missiles and Trump tweets drop in real-time, it seems likely that the situation will escalate unless someone can come to the peace table, and quickly. Tehran is currently evacuating its entire city after Trump announced for everyone to leave the city immediately. Both countries are in the heart of the Middle East, where around 20% of the world’s oil passes through the Strait of Hormuz, which a full-scale conflict would most certainly disrupt. This would send oil prices higher and could start a domino effect of inevitably drawing other countries into this conflict and further creating the fear and uncertainty that cause people to flock to gold in the first place.

 Having only broken the $US3000 ceiling in recent months, the next obvious milestone for gold is $US4000 and beyond. This would translate to over $AUD6000 per oz. Historically, such a move is not out of the question. From 2008- 2011, gold almost tripled in response to the global financial crisis, quantitative easing and global uncertainty.

Today we are looking down the barrel of peak debt, the current geopolitical tensions, weak economic growth, and a possible financial crisis. US$4000 gold would represent the current uncertainty and the continued devaluation of fiat currency, and an escalation in this war could and would ignite gold to send it into uncharted price territory. We wait to see if this conflict can hopefully be de-escalated into peace talks. In the meantime, bullion investors know, and history reveals that gold's true value reveals itself in a crisis.