Gold jumped after Israel carried out airstrikes targeting Iran's nuclear sites and military leadership, raising concerns that hostilities between the two countries could escalate into a wider regional conflict.

Bullion rose as much as 1.7% on safe-haven investor demand, before paring some gains. Israeli Prime Minister Benjamin Netanyahu said the operation would continue until the "threat" was eliminated. Iran vowed a "strong response" to the airstrikes and sent a wave of drones toward Israel.

The U.S. was not involved in the Israeli strikes, according to Secretary of State Marco Rubio, but Iran has said it will retaliate against the U.S. Gold traded about $80 below a record $3,500.10 an ounce hit in April. Copper futures, a reliable gauge of sentiment about economic growth and trade, fell 1%.

"The risk of Iranian retaliation, including threats to U.S. bases, adds to uncertainty and supports safe haven flows," said Charu Chanana, a strategist at Saxo Capital Markets Pte. "With markets already on edge and risk sentiment deteriorating, gold is likely to remain in demand as a hedge — not just against conflict risks, but also potentially spilling over into inflation and volatility."

TOPLive The move higher extended a two-day advance, after weak U.S. inflation and jobs data fueled bets that the Federal Reserve will cut interest rates later this year. A report on Thursday showed U.S. producer price inflation remained subdued in May, while a separate print showed repeated applications for unemployment benefits rose to their highest since late 2021.

Gold has rallied 30% this year, as investors seek a hedge against President Donald Trump's aggressive trade policies and geopolitical tensions, including in Ukraine. Strong demand from central banks and sovereigns has also supported prices.

"Gold was probably the best thing we added to our portfolio in the middle of last year," Mark Andersen, co-head of global asset allocation at UBS Switzerland AG, said on Bloomberg TV. "It helped us when we saw tensions escalating in the Middle East like today, but it also weighed on debt fears, inflation fears, etc."

Israel's strikes on Iran follow repeated warnings from Netanyahu about attacking the OPEC producer and crippling its atomic program. The U.S. and Iran were due to meet for another round of nuclear talks on Sunday in Oman, but it is unclear whether those negotiations will happen now.

Iran launched 100 drones in retaliation for the attack, according to Israel. Iranian state television reported that the head of the Islamic Revolutionary Guard Corps, Hossein Salami, and the Armed Forces Chief of Staff Mohammad Bagheri were both killed in the attack. Spot gold rose 1% to $3,421.01 an ounce at 10:06 a.m. in London. The Bloomberg Dollar Spot Index rose 0.3%. Silver was steady, while platinum and palladium fell. In energy, Brent crude rose as much as 13% before paring some of its gains. (alg)

Source: Bloomberg