Investing.com – Gold has taken a breather Tuesday after climbing over the past couple of weeks to record highs as safe haven demand remained underpinned by concerns over worsening geopolitical tensions, and Citi sees the potential for $3,000 an ounce.

AT 10:05 ET (14:05 GMT), traded 0.5% lower at $2,370.27 an ounce, remaining close to Friday’s record high of $2,431.53 an ounce.

The yellow metal’s recent run-up was driven largely by worsening geopolitical tensions in the Middle East, after Iran attacked Israel over the weekend.  

An all-out war between the two countries could potentially draw in other Middle Eastern powers, as well as the U.S. and its allies. 

Fears of such a scenario fueled demand for gold, which is seen as a traditional safe haven for its relative price stability, especially in times of global strife.

The yellow metal was also supported by central bank buying over the past year, especially in emerging markets, amid growing fears of a global economic downturn in 2024.

“The recent gold rally has been aided by geopolitical heat and is coinciding with record equity index levels; so a steeper risk-off environment should further boost prices,” said analysts at Citi, in a note, dated April 15. 

“More importantly, the bullion complex has de-coupled from US rates and the US dollar, suggesting robust physical consumption drivers (eg, India/China imports, bar/coin), alt-fiat demand, geopolitical hedging, and CB buying are supporting the market.”

The bank has lifted its baseline gold price forecasts to the bull-case scenario, and for 2024 this means a 6.8% bump to $2,350/oz; for 2025E, this means an admittedly massive 40% upward revision to $2,875/oz. 

“We project $3,000/oz gold over the next 6-18m, which is c20% above the forwards and 25%+ north of spot. We expect trading to regularly test and breach $2,500/oz in 2H’24,” the bank added.

By Arshad Mohammed, Timothy Gardner and Michael Martina

WASHINGTON (Reuters) – Iran’s unprecedented missile and drone strike on Israel is unlikely to prompt dramatic sanctions action on Iran’s oil exports from the Biden administration due to worries about boosting oil prices and angering top buyer China, said analysts.

Shortly after Tehran launched its weekend attack – retaliation for Israel’s suspected April 1 strike on the Iranian consulate in Damascus – House Republican leaders accused President Joe Biden of failing to enforce existing measures and said they would take up this week a series of bills to sharpen sanctions on Iran.

Speaking to Fox News on Sunday, Representative Steve Scalise the No. 2 House Republican, said the administration had made it easier for Iran to sell its oil, generating revenues that were being used to “go fund terrorist activity.”

The political pressure to punish Iran creates a thorny problem for the administration: how to deter such attacks in future without escalating regional tensions, raising oil prices or antagonizing China, the biggest buyer of Iranian oil.

Washington has said for months that among its primary goals is to keep the Gaza conflict between Palestinian group Hamas and Israel from metastasizing in to a wider regional war, with a key aim of keeping Tehran on the sidelines.

Several regional analysts said they doubted Biden would take significant action to ramp up enforcement of existing U.S. sanctions to choke off Iran’s crude exports, the lifeblood of its economy.

“Even if these bills pass, it’s hard to see the Biden administration going into overdrive, to try to spring into action or enforce existing sanctions or new ones to try to cut or curb (Iranian oil exports) in any meaningful way,” said Scott Modell, a former CIA officer, now CEO of Rapidan Energy Group.

ENFORCING SANCTIONS

Former President Donald Trump reinstated U.S. sanctions on Iran’s oil in 2018 after pulling out of an international deal on Tehran’s nuclear program. The Biden administration has sought to crack down on evasion of those measures with sanctions against companies in China, the United Arab Emirates and elsewhere.

Despite those efforts, Rapidan estimates Iran’s oil exports have hit 1.6 million to 1.8 million barrels a day, excluding condensates, a very light oil. That is close to the 2 million barrels a day Iran exported before sanctions, said Modell.

The possible effect on gasoline prices is one reason Biden, a Democrat, may not move strongly to curb Iran’s oil exports.

Kimberly Donovan, a sanctions and anti-money laundering expert at the Atlantic Council, said that oil-related sanctions have not been strictly enforced in the past couple of years.

“I would not expect the administration to tighten enforcement in response to Iran’s missile and drone attacks against Israel over the weekend, mainly for concerns (that) could lead to increases in oil prices,” she said.

“The price of oil and ultimately the prices of gas at the pump become critical during an election year.”

A State Department spokesman said the Biden administration had not lifted any sanctions on Iran and continued to increase pressure on the Islamic Republic.

“Our extensive and overlapping sanctions on Iran remain in place, and we continue to enforce them,” said the spokesman.

THE CHINA FACTOR

Aggressively enforcing sanctions could also destabilize the U.S.-China relationship, which Chinese and U.S. officials have tried to repair following a rocky period after the U.S. last year downed a suspected Chinese surveillance balloon that crossed U.S. territory.

Almost all Iranian oil entering China is branded as originating from Malaysia or other Middle Eastern countries and is carried by a “dark fleet” of older tankers that typically switch off their transponders when loading at Iranian ports to avoid detection.

Tanker tracking specialist Vortexa Analytics estimated China acquired a record 55.6 million metric tons or 1.11 million barrels of Iranian crude a day last year. That amounted to roughly 90% of Iran’s exports and 10% of China’s oil imports.

Several analysts suggested Washington might take some action to cut Iran’s oil exports in part to temper any Israeli reaction to the Iranian strikes, which could escalate the conflict.

But they said this would fall short of dramatic action such as sanctioning a major Chinese financial institution and instead could involve targeting Chinese or other entities engaged in such trade.

“If you really want to go after Iran’s oil exports yes, you would have to take meaningful action against China,” said one source familiar with the issue.

“Are you really going to go after the big banks? Are you going to do something that the administration has not done and even the Trump administration did not do?” he added.

Jon Alterman, a Middle East analyst at the Center for Strategic and International Studies, said there were limits to what Washington can do to impose sanctions and that evaders are adept at finding loopholes.

“I’d expect to see a gesture in the direction of (imposing) economic consequences on Iran, but I don’t expect the White House — or any future White House — to be able to completely turn off the spigot of Iranian oil,” he said.

By Alex Lawler

LONDON (Reuters) -Oil slipped for a second day on Tuesday as easing concern about supply risks and a rapidly escalating conflict after Iran’s weekend attack on Israel offset data showing China’s economy grew faster than expected in the first quarter.

Also weighing was stronger-than-expected U.S. retail sales for March that further reinforced expectations the U.S. Federal Reserve is unlikely to rush to cut interest rates, a scenario that dampens the prospects for oil demand.

futures for June delivery fell 52 cents, or 0.6%, to $89.58 a barrel by 1218 GMT. for May slipped 55 cents, or 0.6%, to $84.86.

“The balancing act between sticky inflation, a hesitant Fed and the gradual move towards a full-blown regional conflict keeps oil…in its range,” said Tamas Varga of oil broker PVM.

“Material disruption to oil production, supply or shipping must take place to approach the $100 a barrel milestone. Currently such a development appears implausible.”

Concern that Iran would respond to the strike on its embassy compound in Damascus helped send Brent on Friday to $92.18, the highest since October.

Prices, though, fell on Monday after Iran’s attack on Israel proved to be less damaging than anticipated, easing concerns of a quickly intensifying conflict that could disrupt supply.

“As the risk to supply is waning and a military response from Israel looks less likely as more time passes, prices are holding steady,” said Rystad Energy’s Jorge León. “Tensions are high, and either party’s next moves are hard to predict.”

Iran will respond to any action against its interests, President Ebrahim Raisi said on Tuesday, according to the Iranian Student News Agency, a day after Israel warned it will respond to Tehran’s weekend drone and missile attack.

Iran produces more than 3 million barrels per day of crude oil as a major producer within the Organization of the Petroleum Exporting Countries (OPEC).