Gold jewellery prices in the UAE climbed to more than 190 UAE dirhams ($51.7) per gram on Wednesday, as the escalating tension between the United States (US) and Iran drove investors to traditional assets and pushed bullion prices higher.

The price of 24-karat (24K) gold soared by four UAE dirhams in less than 24 hours to 192.75 UAE dirhams per gram, based on figures posted by the Dubai Gold and Jewellery Group (DGJG) as of 1:10 pm. The price of 22K also went up to 181.25 per gram.

When compared to last year’s rates, the current price of gold jewellery in Dubai would set a buyer back by nearly 36 UAE dirhams per gram.

Analysts said it is likely that the precious metal will post further increases if tensions won’t ease.

“Escalating geopolitical risk has lifted gold to $1,600 [an ounce], and a further escalation is likely to attract more safe-haven flows,” wrote Stephen Innes, chief Asia market strategist at AxiTrader in his latest analysis.

Innes, however, noted that price surges caused by geopolitical risks can, by their nature, be short-lived and volatile.

The bullion had earlier rallied to record-high levels after the death of an Iranian military official during an airstrike sparked tension between the US and Iran.

Vijay Valecha, the chief market analyst at Century Financial, said the US-Iran tension is just one of the many fundamental drivers for gold. He said there are indications that, in the short term, the bullion will touch $1,630 an ounce and climb further to $1,800 an ounce by the end of the year.

“The biggest driver is dovish monetary policy as well as record-low interest rates that are likely to continue in the foreseeable future,” Valecha told Zawya.

“[Some] $11 trillion of assets across the world are having negative interest rates and this environment is a huge tailwind for the yellow metal. It will not be surprising if gold hits $1,800 per ounce by year-end,” he said. (Reporting by Cleofe Maceda; editing by Mily Chakrabarty)(cleofe.maceda@refinitiv.com)

Disclaimer: This article is provided for informational purposes only. The content does not provide tax, legal or investment advice or opinion regarding the suitability, value or profitability of any particular security, portfolio or investment strategy. Read our full disclaimer policy here.

© ZAWYA 2020