The price of gold and bitcoin was jumping on Tuesday morning as the US hit Iran with fresh sanctions.
The Trump Administrations on Monday signed an order levying sanctions on top Iranian military leaders and Supreme Leader Ali Khamenei’s office. The sanctions came in response to the downing of a US drone by Iranian forces last week.
Iran’s foreign ministry spokesperson responded by Tweeted that the sanctions signalled “the permanent closure of the path of diplomacy” with the US.
Gold and bitcoin — both seen as safe haven assets — have been rallying in response to the rising tensions between the two nations.
Neil Wilson, chief market analyst at Markets.com, said: “Four things are really driving gold – falling yields, a weaker dollar, a soft macroeconomic outlook, and geopolitical risks rising in the Middle East.”
UBS raised its short-term target for gold to $1,430 on Monday, up from a previous forecast of $1,380. The investment bank said “the sustained decline in rates is a key factor” in gold’s bull run, as well as “uncertainty around growth and trade risks.”
Gold often rises at times of international tension as investors see it as a safe investment during times of uncertainty. Stocks, by contrast, tend to fall.
Bitcoin’s rise on Tuesday extends a bull run throughout 2019. The cryptocurrency has risen over 170% against the dollar so far this year and broke through $10,000 last Saturday for the first time since March 2018.
Analysts say bitcoins rally has been driven by Facebook’s new Libra cryptocurrency project and renewed corporate interest in cryptocurrencies.
Away from gold and bitcoin, oil is failing to respond to the fresh Iran sanctions. Over the last two weeks oil has risen as tensions between the US and Iran have escalated. However, Brent was down 0.2% to $64.70 (BZ=F) on Tuesday morning and crude was down crude was down 0.1% to $57.84 (CL=F).