Iran Tensions: Impact on Precious Metal Prices

Iran Tensions: Impact on Precious Metal Prices

We take a look at the events occurring between Iran and the U.S. from 28th December 2019 to 10th January 2020. This article looks at what has happened, reactions, and how this news has affected precious metal prices. 

 

What Tensions in Iran?

Tensions between Iran and the U.S. began rising again in 2018 after President Trump pulled the U.S. out of a landmark nuclear deal between Iran and other world powers. The accord was intended to curb Iran's nuclear program and prevent it from acquiring nuclear weapons.

President Trump wanted a new deal that would also reduce Iran's ballistic missile program and its involvement in regional conflicts. The U.S. re-imposed sanctions on Iran, sending its economy into freefall.

Following the death of a U.S. contractor by a rocket attack against a military base in Kirkuk (Iraq) on 28th December 2019, the U.S. blamed Kataib Hezbollah (an Iran-backed militia). The U.S. responded with airstrikes against the Iran-backed militia, killing 25 fighters of Kata'ib Hezbollah across Iraq and Syria on 30th December. As a result, protestors and militia supporters attacked the U.S. embassy in Baghdad on 31st December 2019. President Trump accused Iran directly of orchestrating this attack after dozens broke into its compound.

 

 

On 3rd January 2020, Iran's most powerful military commander, Gen Qasem Soleimani, was assassinated by a targeted U.S. air-strike in Iraq. Soleimani was regarded as a terrorist by the U.S. government by this point, claiming he was responsible for the deaths of hundreds of American troops and was plotting more 'imminent' attacks. The U.S. has yet to provide evidence of this.

The U.S. strike on Soleimani also killed members of Iran-backed Iraqi militias, who vowed revenge. This followed a sharp escalation between the US, Iran and Iran-backed groups in Iraq. 

Two rockets were fired into Baghdad’s Green Zone in retaliation to the assassination on 8th January, but no sign of any large-scale assaults from Iraqi militias followed the Iranian missile attack. The damage from the rockets was minimal with the U.S. reporting no casualties. 

 

What Were the Reactions?

The U.S. House of Representatives is expected to vote on a resolution to force President Trump to halt further military action against Iran unless Congress gives it the all-clear. Vice-President Mike Pence told Fox News that "on the president's direction, we're going to remain vigilant."

 

 

U.K. Prime Minister, Boris Johnson, has told Iranian President Hassan Rouhani there should be "an end to hostilities" but supported Trump's position for the U.S. to defend itself. 

Iranian President Hassan Rouhani said that the U.S. killing of General Qasem Soleimani was an unforgivable crime and that "for the safety of Iran, and bringing back peace to the Middle East, it’s very important to stop the foreigners from interfering in our politics."

Revolutionary Guard commander Brig-Gen Hajizadeh said "Iran had been prepared to fire hundreds or even thousands of missiles as a response." In actual fact, fewer than 20 were fired. The commander's news appearance showed numerous militia group flags behind him, a significant show of regional power. The flags included those of Iraq's Popular Mobilisation Forces (whose leader was killed alongside Soleimani) as well as Lebanese Hezbollah, Yemen's Houthi and Palestinian Hamas.

 

Gold Prices

After spiking to a high of £1,161.75 when news of an Iranian missile attack on a U.S. base in Iraq first broke, the price of gold dropped to £1,143.21 by end of trading the next day. Escalation of events allowed gold to reach a high of £1,228.52 before dropping back down to £1,178.29 after Trump announced, "Iran appears to be standing down, which is a good thing for all parties concerned and a very good thing for the world."

The drop on Wednesday 9th January, was arguably one of the worst trading sessions in gold markets for a very long time, with the gold price dropping down 4.08%, or £50.23 per ounce before Thursday, when de-escalation seemed to be occurring.

Iran Crisis - Gold Prices Chart (GBP)

(Source: LBMA) 

Silver Prices

Unsurprisingly, silver saw similar levels of movement as gold during that time. Prices rose to their highest level since 25th October 2019, reaching £14.36 an ounce. Silver made bigger gains between certain events than that as of gold, such as the U.S. airstrikes and the U.S. embassy being attacked, silver saw an increase of 1.09%, over an increase of 0.88% for gold.

During Soleimani being assassinated and Iran's assassination retaliation, gold made more gains increasing 3.91% by £48.07 as opposed to silver gains of 3.34%, or £0.48 per ounce.

Iran Crisis - Gold Prices Chart (GBP)

(Source: LBMA) 

 

Platinum prices

The PGMs also played a similar tune to that of gold and silver. Small differences could be seen, for example, between the U.S. airstrikes and the U.S. embassy being attacked, platinum prices made gains of 2.46%, a lot more than silver's 1.09% and gold's 0.88%.

One big difference with the platinum prices was the -3.77% decrease during Soleimani having been assassinated and Iran's assassination retaliation. Gold gained 3.91% and silver 3.34% during that same time.

It's important to note that other market and economic variables will also have been influencing the precious metal prices during this time.

Iran Crisis - Platinum Prices Chart (GBP)

(Source: LBMA) 

Palladium prices

Palladium prices saw a big rise during this massively bullish time for the PGM, making big gains of 7.70%, or £126.19 per ounce. 

Iran Crisis - Palladium Prices Chart (GBP)

(Source: LBMA) 

Rhodium prices

Rhodium saw the best start to the year making massive gains just days into the new decade. Prices were around £4,262.56 on 28th December 2019 and on 10th January 2020, markets finished around £5,425.11 an ounce. That's a massive increase of 21.42%, or £1162.55 per ounce

Iran Crisis - Rhodium Prices Chart (GBP)

(Source: Kitco) 

Read '5 Interesting Facts About Investing in Rhodium' here.

 

Conclusion 

In most recent news, the Iranian government has admitted to accidently shooting down a Ukrainian plane carrying Western passengers over Iran airspace. Developments are still unfolding...

Begin owning your own physical precious metals before this year heats up, call or email the Bleyer team on 01769 618618 or [email protected]. Watch for all the events and developments listed and keep up to date with more articles from the Bullion Academy and the links included in Bleyer's weekly newsletter.

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