Gold closes above $2,700 for first time as geopolitical tensions simmer

Gold settled above $2,700/oz for the first time on Friday, extending a rally driven by uncertainty over the Middle East conflict and the tight U.S. presidential election race, as well as expectations of further central bank interest rate reductions, that have sparked a flight to safety among investors.

Pledges from Israel and its enemies Hamas and Hezbollah to keep fighting in Gaza and Lebanon appear to have scuttled any hope that the death of Hamas leader Yahya Sinwar might hasten an end to the Middle East war.

Economic uncertainty also is a prevailing factor in gold’s rise, exacerbated by the upcoming U.S. election, as the policies of both presidential candidates are seen as adding to deficit spending.

Consistently strong U.S. labor market data has reduced hopes for another big Federal Reserve rate cut, but the market is still pricing in smaller rate cuts before year-end – typically a boost for non-interest bearing bullion, as it lowers the opportunity cost.

Front-month Comex gold (XAUUSD:CUR) for October delivery closed +0.8% on Friday to $2,713.70/oz, topping the all-time high set in the previous session, and its 2.1% gain for the week was the sixth consecutive weekly increase.

Also, front-month October silver (XAGUSD:CUR) finished Friday +4.6% to $33.032/oz, its highest settlement value since December 2012; for the week, silver rose 4.8%.

ETFs: (NYSEARCA:GLD), (NYSEARCA:GDX), (GDXJ), (IAU), (NUGT), (PHYS), (GLDM), (AAAU), (SGOL), (BAR), (OUNZ), (SLV), (PSLV), (SIVR), (SIL), (SILJ)

Precious metals mining stocks hitting 52-week highs during Friday’s trading: Agnico Eagle Mines (AEM), ASA Gold (ASA), Gatos Silver (GATO), Iamgold (IAG), Kinross Gold (KGC), Newmont (NEM), Osisko Gold Royalties (OR), Pan American Silver (PAAS), Wheaton Precious Metals (WPM).

Private investors are taking profits at current record high levels, but the pace of liquidations is hardly a rush, as investors are not selling as fast as prices rise, BullionVault director of research Adrian Ash says.

“The measured pace of net selling overall shows that investors remain confident in gold’s long-term outlook,” according to Ash.