Gold soared as much as 2% on Wednesday to vault over the $1,600 ceiling for the first time in nearly seven years, as investors flocked to safe havens, after Iran launched retaliatory missile strikes against US forces in Iraq.

Spot gold jumped 0.8% to $1,585.80 per ounce by 0250 GMT. Prices hit their highest since March 2013 at $1,610.90 earlier in the session. US gold futures rallied 1% to $1,589.30. Iran launched a missile attack on US-led forces in Iraq in the early hours of Wednesday, followed by a “second round” of attacks against US bases in Iraq.

The strike by Iran comes hours after the funeral of Tehran's top military commander Qassem Soleimani whose killing in a US drone strike last week has raised fears of a wider war in the Middle East. “Fears of uncertainty and further escalation in this military confrontation is dragging up gold prices,” said Margaret Yang Yan, a market analyst at CMC Markets.

“This (Iran attacks) is definitely fuelling demand for safe havens, not just gold but also yen, while equities are being heavily sold off.” Risk aversion spiked as financial markets were thrown into disarray after the attack, sending Asian stocks tumbling and oil rocketing. US President Donald Trump said in a tweet late on Tuesday that an assessment of casualties and damage from the strikes was under way and that he would make a statement on Wednesday morning.

Gold is considered a safe investment in times of political and economic turmoil. CMC Markets' Yan said that technically, “gold is heavily overbought,” adding that a pullback could occur if Trump resolves the issue diplomatically without “triggering a full-blown war.” The metal's 14-day relative strength index (RSI) was around 88.

An RSI above 70 indicates a commodity is overbought. Spot gold may break a resistance at $1,614 per ounce and rise towards the next resistance at $1,639, according to Reuters technical analyst Wang Tao. Among other precious metals, palladium hit a fresh all-time peak of $2,056.01 an ounce earlier in the session on sustained supply deficit, and was last down 0.3% to $2,045.08.

The autocatalyst metal touched a fresh record high for the third consecutive session. Silver rose 0.8% to $18.53 per ounce, after hitting its highest since early September at $18.85, while platinum edged 0.1% lower to $970.25.................................BL