Geopolitical tensions and a slower growth rate has led investors rushing for the safe haven of gold, as the yellow metal prices have shown an acceleration of 5.5 per cent during the first week of 2020 itself.
Gold prices inched lower on Tuesday, a day after hitting their highest in almost seven years, with a lack of immediate escalation between the United States and Iran denting bullion's safe-haven appeal. Last week, the USA had killed top Iranian General Qasem Soleimani in an air strike near Baghdad airport, which sparked tensions between Washington and Tehran. It was not immediately clear if there were any casualties, although USA president Donald Trump tweeted "All is well!" shortly after the attacks.
Markets have stabilised to some degree after the initial burst of volatility with investors taking some reassurance from the absence of United States casualties and the measured tone of the official responses.
WTI Crude blasted higher during early trading on Wednesday, breaking above $65 after Iran fired missiles at air bases in Iraq housing U.S. troops.
Gold futures for February delivery on New York's COMEX was down $11.35, or 0.7 percent, at $1,562.95 per ounce by 1:25 PM ET (18:25 GMT).
"This is not he healthy start to the New Year expected by investors".
Lukman Otunuga, senior research analyst at FXTM, said: "Escalating tensions in the Middle East have hit global risk appetite, boosting buying sentiment towards safe-haven assets".
Focusing on the technical picture, the precious metal is heavily bullish on the daily charts as there have been consistent higher highs and higher lows. "So, watch price action around $1,555 closely this week". Alternatively, sustained weakness below $1600 could trigger a retracement back towards $1570 and $1555.
Gold rose after rising geopolitical uncertainty and weaker rupee, said Devarsh Vakil, director of securities advisory for HDFC (PCG).
"If tensions do die down, as we expect they should, then inevitably gold will give back some of its recent gains".