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Investors looking for financial safe haven amid intensifying conflict in the Israel-Gaza war and growing global uncertainty have sent the price of gold to record levels.
Key points:
- The gold price rise has been attributed to conflict in the Middle East and the exchange rate with the United States
- While the gold price has hit records in Australian dollar terms, it has not reached as high in US dollars
- The metal has long been a safe haven for investors at times of uncertainty
The Australian dollar gold price hit an all-time record high this week, briefly reaching $3,130 an ounce on Friday morning.
The rise was driven by international uncertainty, in particular the ongoing conflict in the Middle East, with Australian dollar gold price records having been set weekly since the conflict began.
Surbiton Associates gold industry consultant Sandra Close said the precious metal was typically a safe haven for investors.
"More than anything, it's uncertainty [driving the price up]," Dr Close said.
"The sad and difficult situation in the Middle East at the moment ... and the uncertainty of that is really, I think, moving the market at the moment."
The record high price in Australian dollar terms was also helped by the exchange rate with the United States.
While not hitting record terms, Dr Close said the US Dollar price was still significantly high.
"It's not a record so much in the US dollar price as the Aussie price, because our exchange rate against the US dollar is relatively low at the moment," she said.
"But given the situation overseas, and particularly in the Middle East, every day, you're never quite sure what will happen next."
Miners boosted
Several Australian gold miners including Northern Star Resources, which owns the Kalgoorlie-based Superpit gold mine, had share price rises in line with the movement in commodity price this week.
However, Dr Close said there could be other factors at play.
"Because, of course, some of the companies report in Australian dollars on the ASX, others report overseas and that makes an enormous difference," she said.
"But even then, we find that very often even Australian investors tend to follow the US dollar price of gold rather than the Australian dollar price of gold, even though that's what we're trading in here.
She said the market differentiation didn't always quite make sense.
"So some have gone up, some of them down, and there's not always quite a rational reason why," she said.
Dr Close said it was impossible to know how high the price may get, especially with such a volatile situation as the underlying cause of the rise.
"I think the question is, whether [the conflict is] confined to a couple of countries, or whether it in fact, it spreads a lot further, and is a far more difficult situation for the world to handle," she said.
"You cannot predict the future, either in respect of just the gold price alone, or indeed, the whole social financial market situation that we all face."