Gold rises as investors seek safe havens amid Middle East conflict fears
[BENGALURU] Gold prices inched higher on Monday (Jun 23) as investors turned to safe-haven assets amid growing fears of a broader Middle East conflict, with markets closely watching for Iran's response to US attacks on its nuclear sites.
Spot gold was up 0.1 per cent at US$3,371.30 an ounce, as at 0020 GMT. US gold futures were steady at US$3,387.20.
The world braced on Sunday for Iran's response after the US attacked key Iranian nuclear sites, joining Israel in the biggest Western military action against the Islamic Republic since its 1979 revolution.
In a televised address, US President Donald Trump warned Iran against retaliating, stating that any response would trigger further attacks unless Iran agreed to pursue peace.
Tehran vowed retaliation, with missile exchanges between Iran and Israel continuing over the weekend. Israeli fighter jets struck military sites in western Iran, according to officials, while Iranian missiles wounded scores of people and flattened buildings in Tel Aviv.
Meanwhile, the close split at the US Federal Reserve over whether to keep hedging against inflation risks or move forward faster with rate cuts came through on Friday in the first public comments from policymakers following a decision this week to hold borrowing costs steady for now.
The Fed's latest Monetary Policy Report to Congress, released on Friday, said that US inflation remains somewhat elevated and the labour market is solid. However, it suggested that the full impact of Trump's tariffs is likely yet to be felt, reiterating the Fed's stance that it can wait for greater clarity before making policy moves.
On Friday, Trump once again floated the idea of firing Fed chair Jerome Powell, whom he has long criticised for not lowering interest rates as much as he wants.
Elsewhere, spot silver was up 0.1 per cent at US$36.03 per ounce, platinum fell 0.3 per cent to US$1,260.78, while palladium edged down 0.1 per cent to US$1,043. REUTERS
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Choosing to take military action against Tehran's enemies 'is extremely risky', stressed Amin Saikal, distinguished visiting fellow at the S Rajaratnam School of International Studies. 'It will invite massive American retaliation … President Trump has made that very clear in his speech about bombing the nuclear sites.' Iran could also downplay the damages to its nuclear sites and not directly engage the US, he told CNA's Asia Now. Saikal, who is also emeritus professor of Middle Eastern and Central Asian studies at the Australia National University, said Iran could block the Strait of Hormuz as a last resort. 'Iran is capable of doing that by sinking a number of ships in the strait and that will be enough to deter many ships from going through,' he added. 'My hunch at this point is that probably they will be focusing very much on hitting Israel as hard as they can, but of course, Israel is also hitting them very hard. 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Zunes said: 'There may be some calculation as to whether the principle of fighting back is worth the enormous damage that could be done to the country, (to) both its military and civilian infrastructure.' While Trump has said Saturday's air strikes had "totally obliterated" key Iranian nuclear sites, experts have cautioned that the extent of damage was still unclear. 'I do not believe that a very accurate battle damage assessment is actually possible because there are no boots on the ground,' said International Crisis Group's Vaez. 'But the Trump administration could think, especially if there is no imminent Iranian retaliation, that because it can get away with conducting these kinds of strikes, it is possible that it would do a second round or a third round,' he added. 'This is precisely the kind of mission creep that the US has experienced in that part of the world. Quite often it goes in thinking that it can conduct a clean and contained operation, but it actually turns into a long nightmare, a quagmire that is not easy to get out of.' Even if the key nuclear sites are destroyed, observers believe the strikes would only delay – not eliminate – Iran's ability to develop a nuclear weapon. Zunes said Iran still has the knowledge to build these facilities, adding: 'It will set them back a few years, but they could just start all over again. And indeed, they may redouble their efforts.' Analysts have said Iran would likely have secretly taken its highly enriched uranium stockpile to hidden locations before the US strikes. 'Because (United Nations) nuclear inspectors are no longer able to access these sites, which are now war zones, we are not sure where the materials and the machineries are,' said Vaez. Will Iran return to the negotiating table? The US has called for Iran to return to the negotiating table, highlighting the risk posed by Iran's nuclear programme to international security. But observers are doubtful that diplomacy can break the deadlock. 'I don't see the odds of a deal very high right now, because the Iranians have concluded that Trump is not a reliable negotiating partner,' said Vaez, adding that the US president previously withdrew from a nuclear deal that the Iranians were complying with in 2018. 'It is very hard to imagine that the Iranians would come back to the negotiating table anytime soon.' In 2015, Iran agreed to dismantle much of its nuclear programme in exchange for sanctions relief under the Joint Comprehensive Plan of Action (JCPOA). The nuclear agreement was signed between Iran and six world powers, including the US. However, Trump withdrew the US from the accord in 2018, claiming it failed to curtail Iran's missile programme. Iran stopped honoring the deal's limits a year later. Meanwhile, Iran's key global allies, Russia and China, have condemned the US military action. But observers believe they are unlikely to risk too much by being directly involved. 'I think both would be very concerned about the unilateral nature of the Israeli and US attacks, and the idea that the US can get away with this,' said Zunes. 'Since Trump did not get the approval of Congress or anything, there may be a fear that he could take this as a blank check for further unilateral military action elsewhere.' Iranian Foreign Minister Abbas Araghchi is set to meet with Russian President Vladimir Putin on Monday (Jun 23), when they are likely to discuss the latest developments. But Vaez believes Moscow will tread carefully and not get pulled into the conflict, adding: 'The Iranians don't really have a lot of friends or the kind of strategic allies that they can count on.'
