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Gold Bounces Overnight on Geopolitical Tensions

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Gold Bounces Overnight on Geopolitical Tensions

charting gold priceEven as fears of an immediate trade war with China are subsiding, geopolitical strife in the Middle East drove investors back into gold on Monday.

Spot gold was unchanged at $1,332/oz in early trading after a V-shaped rebound from overnight losses. The silver price was also basically flat at $16.39/oz.

Platinum rose 1.1% (+$10) to $926/oz. Palladium, which lost 7% last week, surged 2.4% (+$22) this morning to $922/oz.

U.S. and Russia At Odds Over Syria, Sanctions

The years-long civil war in Syria is continuing to envelop world powers, namely Russia and the United States.

The latest flaring of tensions stem from an alleged chemical attack by the Assad regime and a missile attack against a Syrian airbase that is believed to have been carried out by Israeli forces.

In the larger sprawl of the conflict, the U.S. and Israel stand on one side (against Assad) while Russia and Iran stand on the opposite side (supporting Assad).

Russia is also reacting to new U.S. sanctions against many of the country's richest individuals and companies. Major Russian firms saw their stock prices tumble by as much as 50%.

Meanwhile, stocks opened about 0.75% higher on Wall St.

Equities in the U.S. last closed down more than 2% on Friday when the Dow Jones fell below 24,000 and the Nasdaq crossed below 7,000.

It was the fifth time the Dow has lost more than 2% in a single trading day this year. By comparison, that didn't happen once in 2017.

Shares in Europe showed little movement on Monday while most markets in Asia closed higher last night. China's Shanghai Composite slipped less than 0.1%.

Markets May Be Reaching a Turning Point

Just as global markets calm down about the White House's posturing against China on trade, they will now closely monitor potential U.S. involvement in Syria.

President Trump vowed there will be a "big price to pay" if it is confirmed that the Syrian government is still using chemical weapons. Russia claimed these weapons were eliminated back in 2013.

Aside from the growing drumbeat of war, monetary policy also remains in the spotlight. In the recent past, stock market volatility has seemed to deter the Federal Reserve from normalizing interest rates too quickly.

That may no longer be the case under new Fed Chair Jerome Powell.

Some analysts are suggesting that makes this the perfect time to buy gold as a form of portfolio insurance.

The consumer price index (CPI) for March is due out on Wednesday. This gauge of inflation could have a decided impact on rate-hike expectations. The next FOMC meeting will be held in May.

In forex trading, the dollar dipped 0.2% to 89.9 on the DXY index. This helped the euro add 0.3% to $1.23 and the pound sterling gain 0.4% to $1.415.

After closing near 2.77% on Friday, the 10-year Treasury yield eased up three basis points to about 2.805% on Monday morning. Most global bonds also fell.

Commodities got a lift from the softer dollar. WTI crude lost 4.6% last week but traded about 1.25% higher to $62.84/bbl.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

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