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Gold traded near a seven-year high on Monday as investors sought a traditional safe-haven investment amid rising tensions between the United States and Iran.

Gold futures traded as high as US$1,580 an ounce on Monday, the highest level since April, 2013, before closing at US$1,568.60. They are up US$45 an ounce already this year.

Prices have climbed almost 3 per cent since a U.S. drone strike killed General Qassem Soleimani, head of Iran’s Quds Force, an elite military and intelligence unit responsible for foreign operations, in Bagdhad on Friday. Gen. Soleimani was seen as the chief architect of Iran’s increasing military presence in the Middle East, and a growing threat to U.S. security.

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Iran has vowed to strike back. In response to the threat of retaliation, U.S. President Donald Trump said he is prepared to attack a number of Iranian targets, including cultural sites.

Historically, investors have sought out bullion as a refuge in times of heightened global uncertainty.

“There will be another response in the next week or two, when Iran fires upon a U.S. vessel of some sort, or attacks a Saudi oil facility. They have no choice," said Dennis Gartman, former editor and publisher of the Gartman Letter, a daily market commentary.

On Sunday, Tehran said it is abandoning commitments made in 2015 to pare back its nuclear capabilities, meaning the country will now enrich uranium without restriction. Despite the move, Iran said it will continue to co-operate with the International Atomic Energy Agency, which is monitoring its nuclear program.

Even before its most recent run-up, the price of gold had risen about 20 per cent over the past 12 months, driven by a protracted trade war between the United States and China, and extremely low global interest rates. Since gold doesn’t yield anything, its attractiveness as an asset class goes up in a low-rate environment.

Jeffrey Christian, managing partner with CPM Group, said that while investors could hedge some of their equity market risk by owning securities other than gold, such as various derivatives on equities, currencies, or interest rates, gold is one of the few hard-asset alternative investments.

“There are alternatives to gold, but they are all paper-based,” Mr. Christian said. “Gold is the ultimate safe haven.”

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Despite renewed optimism over the price of bullion, gold stocks were mostly flat on Monday, with the TSX Global Gold Index ending the day down 0.1 per cent.

Vancouver-based B2Gold Corp. was the strongest performer, rising by 3 per cent on the Toronto Stock Exchange.

In a note to clients, Fahad Tariq, analyst with Credit Suisse, said that he doesn’t expect the increase in the commodity price to change much in terms of how senior gold companies operate, with the focus to remain on generating free cash flow and returning capital to shareholders.

“A return to the last bull cycle trend of costly M&A and expansion projects seems unlikely at this time given the investor focus on capital disciple,” he wrote.

Mr. Tariq added that historically the stocks that do best in a rising gold price environment are the intermediate producers.

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