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Gold surges as US downs Iranian drone
Gold prices climbed back above $5,000 an ounce on Wednesday, reversing recent losses after the US military shot down an Iranian drone in the Arabian Sea, reigniting investor concerns over global stability.
Market reaction to geopolitical flare-up
The precious metal, traditionally viewed as a safe haven during uncertainty, jumped to $5,061 per ounce-an 80% increase compared to the same period last year. The spike followed confirmation from a US military spokesperson that an Iranian drone had been intercepted after approaching an American aircraft carrier.
Tehran has yet to respond to the incident, which occurred on Tuesday.
Recent volatility and key drivers
Gold had reached a record high of $5,500 in January, driven by shifting US trade policies, persistent geopolitical risks, and central bank purchases of bullion. However, prices plunged 9% last Friday-the steepest single-day drop since 1983-after President Donald Trump nominated Kevin Warsh as Federal Reserve chair.
Investors perceived Warsh as a stabilizing choice, easing fears about the Fed's independence following Trump's criticism of current chair Jerome Powell and the pace of interest rate cuts.
Expert analysis on market trends
"The recent rise is largely driven by speculators buying the dip. The slump was too tempting to ignore, and the fundamental drivers for gold remain intact."
Emma Wall, Chief Investment Strategist, Hargreaves Lansdown
Wall cautioned that further volatility is likely, citing upcoming US interest rate decisions, November's mid-term elections, and ongoing conflicts in Ukraine and the Middle East.
Silver also recovers, but remains volatile
Silver prices rebounded by 5% to $92 an ounce on Wednesday, though the metal remains far below its January peak of over $120. Unlike gold, silver had experienced a sharper decline, plummeting 27% in a single day last Friday.
Despite the recovery, silver is still nearly three times higher than its value a year ago.
Long-term outlook for precious metals
"Gold has been incredibly volatile, but long-term factors support higher prices. Central banks, from China to Poland, continue to accumulate bullion, bolstering demand."
Lindsay James, Investment Strategist, Quilter
James also noted that market anxiety over AI-driven disruptions in tech sectors has pushed investors toward safe-haven assets until uncertainties subside.
