Rising tension with North Korea has spurred demand for assets that investors think might be more likely to hold their value in the case of a global crisis.
Increased demand has pushed the gold price to trade as high as US$1,342.55 an ounce, the highest level for a year, according to Bloomberg data on 6 September, 2017.
CommBank analysts said in a report that “while the reliability of safe-haven demand translating through to higher gold prices is not consistent, we think that a non-financial risk event like a military conflict will be positive for gold”.
But signs that the US Federal Reserve might be more hesitant to accelerate any rate increases could also be a factor, CommBank said.
“We still believe that higher US rates will eventually weigh on prices early next year. But that doesn’t negate the surge in gold prices as markets price in North Korean tensions,” the report said.
Consequently, CommBank expects gold prices to average US$1,265 an ounce in third quarter 2017 and US$1,300 an ounce in fourth quarter 2017, up 3% and 7% on previous forecasts respectively.
For calendar year 2018, CommBank forecasts an average gold price of US$1,261 an ounce, up 3% on its previous forecast.
Watch the CommSec video for more insights about the gold price and the markets.