Rising Middle East tensions boost gold demand as safe-haven asset; prices may rise 15% if conflict erupts, analysts predict.
Rising Tensions and Safe-Haven Demand
Rising tensions in the Middle East have prompted investors to seek safe-haven assets, driving a significant increase in demand for gold. On Wednesday, reports indicated that Iran has sharply increased its crude oil exports from Kharg Island, shipping about 20.1 million barrels between February 15 and 20, approximately three times January’s level. This preemptive release is seen as both a supply buffer and a hedge against potential disruptions if tensions with the United States escalate.
Impact on Gold Prices
In the event of a direct military conflict between the U.S. and Iran, gold could experience a price increase of around 15% within two weeks due to heightened safe-haven demand. Analysts at Bitunix predict that prices could target a range of $5,500-$5,800 per ounce. This expectation is based on historical market behavior during periods of geopolitical uncertainty.
Gold vs. Bitcoin: Investment Shifts in India
In response to the volatile markets, Indian investors are rapidly reallocating their capital into gold. Data from The Kobeissi Letter shows that gold ETF inflows have surged to 250 billion rupees (approximately $2.7 billion), setting an all-time high and surpassing equity mutual fund inflows for the first time. This shift highlights a fundamental change in how Indian investors are allocating their capital, given India’s status as the world's second-largest gold consumer.
Weak Crypto Market Amidst Safe-Haven Shift
Despite the move towards safe-haven assets, crypto markets have shown limited conviction, according to recent reports from Glassnode. Bitcoin continues trading between $60,000 and $70,000 with weak whale accumulation and persistent ETF outflows. Additionally, nearly 9.2 million BTC are currently held at a loss, signaling that more holders are selling than taking profits.
Gold Price Performance
As of the latest data, gold is trading at approximately $5,172 per ounce, slightly down from the previous day but up about 4.4% over the past week. This performance reflects ongoing geopolitical tensions and investor behavior in favor of safe-haven assets.
Bitcoin ETFs' Recent Rebound
In a related development, U.S.-listed spot Bitcoin ETFs experienced a rebound on Wednesday as Bitcoin prices rose above $68,000. These funds attracted about $506.5 million in daily inflows, marking their largest since early February and signaling a potential end to five consecutive weeks of outflows.
Conclusion: Geopolitical Tensions Driving Investment Patterns
The current geopolitical climate is driving significant shifts in investor behavior, with gold emerging as a preferred safe-haven asset over equities and crypto. As tensions persist, the market dynamics suggest that both physical and digital assets will continue to be influenced by global events, reflecting broader trends in investor sentiment and risk aversion.
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