NEW YORK (TheStreet) -- Gold isn't poised for long-term gains, and it won't hold higher than $1,300 an ounce for a protracted period.
Escalating violence in Iraq and comments on loose monetary policy from Federal Reserve Chair Janet Yellen have lent support to rising gold prices, but analysts said this rally is short-lived.
Gold for August delivery has climbed about 3.8% since the start of last week, when militant group ISIS stepped up attacks in Iraq, while the most actively traded gold ETF -- SPDR Gold Trust (GLD) -- has jumped 3.7% across the same period. Investors would be unwise to assume a fundamental shift occurred in the market.
"Gold really is going to gain support from geopolitical [events] in the short term, absolutely, it's going to gain support from other commodities being up on the same [events], namely oil, and I think it's gaining support because the market is a little bit short," Graham Leighton, a trader at Marex Spectron, said in a phone interview from New York.
Gold rose as ISIS wrested control of key northern Iraqi cities as investors bought the yellow metal as a safe haven against geopolitical uncertainty. But should Iraqi forces or a combined effort of Iranian military and U.S. airstrikes push back ISIS, the market would eliminate that premium added to the gold price.
The Iraqi government on Thursday pleaded for U.S. assistance as the militant group battled for control of the Baiji oil refinery, the largest of its kind in the country.