JPMorgan says gold has further to run on escalating Middle East conflict

Published Mon, Apr 15 20249:32 AM EDTUpdated Mon, Apr 15 202410:25 AM EDT

Gold could have room for further upside as tensions in the Middle East mount, according to JPMorgan. The firm's forecast calls for bullion to average $2,500 per ounce in the fourth quarter, but analyst Gregory C. Shearer said in a note Sunday that the combination of tensions in the Middle East and prohibitions on Russian gold will continue to support elevated precious metal prices. Spot gold has been on a tear in 2024 with a gain of more than 14%. Prices hit an all-time high of $2,448.80 per ounce intraday on Friday as investors braced for a further escalation in the Middle East. Prices also settled Friday at a record close of $2,374.10. Over the weekend, Iran made good on its threat to attack Israel with the launch of more than 300 drones and missiles against targets in the country. Iran said it was responding to an Israeli strike in Damascus, Syria. @GC.1 YTD mountain Gold hit a fresh all-time high on Friday, but JPMorgan thinks bullion has more room to run. Investors also remain wary of persistently high inflation, which has pressured markets in recent days and pushed off expectations for Federal Reserve interest rate cuts. "Given positioning and recent price action, mean reversion risk in gold still remains elevated in the near-term though geopolitics remain a bullish-skewed wildcard amid risks of an escalating retaliation cycle between Israel and Iran," Shearer said. "Overall, we think any corrections lower in price will still be bought into and think the longer-term direction of travel is still higher over the coming quarters." Shearer added that gold-holders are unlikely to part with their holdings moving forward as prices surge. "To us, the most surprising observation is actually a lack of physical sellers into the rally which we would have typically expected given the extent of the surge in pricing," the analyst said. "In essence, rather than being driven by an onslaught of fresh physical demand, it appears like the recent and more illiquid jump in early April could have more to do with a lack of sizeable sellers in a generally still well bid gold market." — CNBC's Michael Bloom contributed to this report.