Wild fluctuations in the price of gold continued on Wednesday as geopolitical tensions reignited after the US downed an Iranian drone.
The precious metal, which is seen as a so-called “safe haven” for investors in times of uncertainty, shot back above $5,000 (£3,650) an ounce following days of sharp falls.
Gold prices had been propelled to record highs by rapid changes in US trade policy, ongoing geopolitical uncertainty and conflict and central banks increasing their purchases of bullion.
Wednesday’s jump, to $5,061 per ounce, left the price of gold around 80% higher than the same time a year ago.
A US military spokesman confirmed the Iranian drone had been shot down after it “aggressively approached” an American aircraft carrier in the Arabian Sea.
Tehran has not commented on Tuesday’s incident.
Gold prices peaked at $5,500 in January but last Friday tumbled after US President Donald Trump nominated Kevin Warsh as chair of the Federal Reserve.
Warsh is viewed by investors as a relatively safe pick, calming concerns about the independence of the central bank following attacks by Trump against the current chair Jerome Powell and the pace of interest rate cuts.
Friday’s drop, which saw the gold price fall 9%, was its biggest one-day decline since 1983.
Emma Wall, chief investment strategist at Hargreaves Lansdown, said the rise in the gold price is “mostly fuelled by speculators buying the dip”.
“The slump proved too enticing to ignore and the fundamental drivers of the metal are intact,” she said.
But she warned that there is likely to be more volatility to come, with interest rate decisions in the US, mid-term elections in November and continuing tensions in Ukraine and the Middle East.
Silver has also recovered some losses seen over recent says with prices climbing by around 5% to $92 an ounce on Wednesday.
The metal saw far more dramatic falls than gold after January’s surge, plunging by 27% in a single day on Friday.
But, despite being well off January’s peak of over $120, silver is still worth almost three times what it was this time a year ago.
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