GOLD Vs GEOPOLITICS

The financial markets know that Gold is safe haven. Whenever and wherever, around the word, a military conflict or any geopolitical instability begins to appear, there is a run on gold either physically or electronically via online brokers. The sudden rush on gold due to the uncertainty that global crisis bring have sent gold prices climbing.

The above chart shows the behavior of Gold during historic events:

  1. War in Syria began after antigovernmental coalitions took over parts of Syria declaring their own state.
  2. U.S. announces military action on Syrian ground
  3. U.S. and allies launch airstrikes on ISIS
  4. U.S and coalition airstrike intended to target ISIS instead strike Syrian soldiers, causing diplomatic tensions between Russia and US to begin.
  5. U.S. launch 59 tomahawk missiles to a Syrian Government airbase because of assumed use of chemical weapon attacks.In the same period North Korea’s Kim antagonizes the U.S. with threats of strikes on U.S. cities using ballistic missiles.
  6. President Trump tweets “Russia get ready for Syria missile attack with nice new smart missiles” in response Russia vows to shoot down any missile fired at Syria.

 

The Gold market continues to react to the news finding itself between the price levels of 1360-1.400. The latest attempt to break the multi-year high price of $1365/oz was yesterday 11/04/2018 after U.S. president Trump tweeted against Syria and Russia. A few hours after news have been digested and with some help from the FOMC minutes, gold price finally retreated back to $1350/oz. Will this be the time that Gold breaks above 1365 and will open the road to 1400 and above? This time it’s all about geopolitics and not real market economic events.

In such a tumultuous situation it is better to be cautious if a strategy suggest buying gold dips below $1340, and this should only be done if your portfolio can afford a drawdown of $1250/oz. In the event that talks will take place on the Syrian crisis between U.S. and Russia, then this will be seen as positive and gold may retrace back to multi-month support of $1310.

 

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