By Asha Sistla
(Reuters) – Gold surged to nearly seven years' high on Monday as escalating tensions between the U.S. and Iran led to safe haven metal as palladium surpassed the $ 2,000 level and reached a record high.
Spot gold rose 1.7% to $ 1,577.98 an ounce at 0409 GMT. At the beginning of the session, it had increased by 1.8% and reached $ 1,579.72, the highest level since April 10, 2013.
US gold futures rose 1.8% to $ 1,580.30.
"The focus is on geopolitics," said Benjamin Lu, an analyst at Phillip Futures. "Tensions between Iran and the US have widened to a boiling point. This has driven gold prices up."
President Donald Trump threatened to sanction Iraq on Sunday after Baghdad demanded the withdrawal of American and foreign troops. This was in view of the growing backlash against the US killing of a leading Iranian military commander, which intensified fears of a major conflict.
Iran fueled further uncertainty that it would drop the uranium enrichment limits and step back from commitments to a nuclear deal with six major powers in 2015.
The risk-averse mood of the market underpinned gold bars, which are often seen as an alternative investment in times of political and financial uncertainty.
Asian stocks moved from an 18-month high and oil prices rose due to intense hostility in the Middle East.
"If it (gold) breaks the key resistance level of $ 1,585, it would lead to a key psychological level of $ 1,600," said Lu.
Investors also took stock of a private survey on Monday, which saw the Chinese service sector expand more slowly in December, with business confidence falling to the second lowest in existence despite an upturn in orders.
Spot Palladium reached a historic high of $ 2,020.18 an ounce, most recently rising 1.5% to $ 2,017.67.
"The (palladium) market continues to contract and that's what drives the market up," said ING analyst Warren Patterson.
Palladium, which is mainly used in catalytic converters for vehicles, experienced a continuing supply deficit in 2019, increasing by around 54%.
Otherwise, silver rose 2.2% to $ 18.45 an ounce after hitting a more than three-month high of $ 18.50 while platinum rose 1% to $ 990.05.
(Reporting by Asha Sistla in Bengaluru; editing by Clarence Fernandez and Rashmi Aich)