Gold hits six-year high amid escalating geopolitical tensions

The yellow metal traded as high as $1,438 an ounce overnight - its best level since May 2013 - and by 1000 BST, it was up 1% at $1,432.20 an ounce.

Neil Wilson, chief market analyst at Markets.com, summed things up nicely: "Four things are really driving gold - falling yields, a weaker dollar, a soft macroeconomic outlook and geopolitical risks rising in the Middle East."

US President Trump has signed off on a new round of "hard-hitting" sanctions against Iran following its downing last week of a US surveillance drone. The measures will specifically target Supreme Leader Ayatollah Ali Khamenei and other Iranian officials. US Treasury Secretary Steven Mnuchin said they "go after the supreme leader's office and lock up literally billions more in assets".

Iranian Foreign Ministry spokesman Abbas Mousavi said the "fruitless sanctions" mean "the permanent closure of the road of diplomacy with the frustrated US administration".

Konstantinos Anthis, head of research at ADSS, said market participants are taking to the safety of the yen and gold in response to the escalating tensions between the US and Iran.

"Both the Japanese currency and the yellow metal have benefitted from the decline in the dollar after the Fed opened the door for an easier monetary policy and given the developments with Iran, their rallies may not be over," he said.

Naeem Aslam, chief market analyst at Think Markets, said gold is likely to touch the $1,550 mark soon. Like Wilson, he pointed not just to heightened geopolitical uncertainty in the Middle East and a weaker greenback, but also to higher bond prices.

"An important factor which investors should be paying attention to is the correlation between the gold price and the size of the negative-yield debt," he said. Aslam said there is a "strong correlation" which means that the gold price rises as the size of the negative yield debt increases.

"This makes perfect sense, of course, no one likes to have negative yield debt. The safer bet is the shining metal. Given the current monetary policy adopted by the European Central Bank and the Federal Reserve bank, it is likely that the gold price may actually touch $1,550 in the next few months."

Neil Wilson was even more bullish, suggesting that the yellow metal could hit $1,600 "quite swiftly" if real yields continue to fall and hit levels touched at points in 2015 and 2016.

"10yr Treasury yields have fallen rapidly in June to settle around 2%, dragging down real yields and pushing up on gold prices. A return to negative real US yields would be incredibly bullish for gold. We don’t yet know however whether the bond rally has enough legs to continue pushing down on yields. An awful lot depends on the Fed."