There is likely to be more upside to gold as the war clouds loom over the Middle East amid escalating rhetoric between the US and Iran. [Representational image]Creative Commons

Analysts are predicting more upside to gold prices as hostilities between the US and Iran continue to escalate. Tuesday night's Iranian ballistic missile strikes on two airbases in Iraq that house US military assets and the threat of further escalation are likely to buoy the yellow metal. On Wednesday morning, gold raised to a new high of Rs 41,278 for 10 grams in morning trade on the Multi Commodity Exchange of India (MCX), market reports show.

Apart from geopolitical tensions in the Middle East, gold is likely to get further direction from US monthly non-farm payroll data, due on Friday

US reaction on the missile strike

US President Donald Trump tweeted 'all is well' indicating no casualties after a dozen missiles hit the two bases. The world would be keenly watching an address to the nation he has promised on Wednesday morning, US time.

On MCX, February gold futures surged 1.5 per cent or nearly Rs 615 on Wednesday to a record high of Rs 41,278 per 10 gram before receding a little bit, according to a Mint report. Silver futures on MCX jumped 1.4 per cent or nearly Rs 700 to Rs 48,785 per kg. Safe-haven assets like precious metals surge in times of perceived political or military turmoil.

Elite Al Quds force

The rising tensions in the Middle East have been driving up gold prices in India from the start of the year after the killing of Qasem Soleimani, the Iranian elite Al Quds forces chief, in a drone attack in Baghdad. In four days, gold has been up about Rs 2,000 per 10 gram. The marked depreciation of the rupee against the US dollar has also contributed to a shift towards gold. The rupee on Wednesday was trading at 72.01 against the US dollar in early trade, the report says.

Gold surges on Middle East tensions
Gold surged on Wednesday after tensions rose in the Middle East amid an Iranian missile strike on two Iraqi bases harbouring US forces. February futures in the Multi Commodity Exchange of India (MCX) hit a new high early on trade. Zerodha Kite

In global markets, gold prices surged 2 per cent to cross the key $1,600 mark, a seven-year high, as investors sought refuge in the safe-haven metal amid escalating Iran-US crisis. Spot gold rates climbed over 2 per cent to as much as $1,610.90. Among other precious metals, silver jumped 1.2 per cent to $18.60 per ounce while platinum advanced 0.3 per cent to $973.95. Palladium hit a fresh all-time peak of $2,056.01 an ounce, the report said.

US Federal Reserve

Apart from geopolitical tensions in the Middle East, gold is likely to get further direction from US monthly non-farm payroll data, due on Friday, the Mint report says citing a note by Abhishek Bansal, chairman of ABans Group of Companies. The US Federal Reserve will also take cues from payroll data to decide the policy path in 2020, he said.

Analysts see more upside for gold prices amid the Middle East crisis and economic uncertainties. In an indication of the investor sentiment, holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.10 per cent to 896.18 tonnes on Monday, as compared to Friday, the report said. Speculators added to their bullish positions in COMEX gold and silver contracts in the week to December 31, SMC Global Securities Ltd said in a note.