Gold Surges after Airstrikes in Syria: What’s Next?

09 Apr
President Trump Meets President Xi Jinping

Gold Surges after Airstrikes in Syria: What’s Next?

Gold Market Discussion

Gold Surges after Airstrikes in Syria by the U.S.

Gold surges after airstrikes in Syria on Thursday night to end the week hitting the $1,270 mark on Friday. In retaliation for an alleged Syrian chemical attack on civilians last week near Idlib, the U.S. fired 59 Tomahawk cruise missiles at Shayrat Air Base late Thursday night. The international community had mixed sentiment. Some key U.S. allies (including Turkey, the U.K., Germany and others) praised the military action saying that Syrian president Bashar Al-Assad brought this strike upon himself by dropping sarin gas on a rebel-held village that resulted in women and children casualties. However, Assad has denied government responsibility for the attack.

Russia, on the other hand, quickly condemned the U.S. strike against a foreign power. Russia has committed air support and troops to the Syrian government, and cautioned the U.S. against engaging militarily against Assad’s forces. Warning was given to Russia of the impending missiles in a short window before they struck to ensure Russian men and equipment would not be attacked.

By Friday afternoon, gold pulled back some of its gains, but still settled above $1,256.

What this means for investors: As many investors moved into gold for its safe haven aspects, some investors did some profit taking during the week, which could have depressed prices somewhat.

The amount of geopolitical tension this situation has augmented is not to be underestimated even though the markets appeared to be holding for now, waiting for a sign  of what actions are next from Syria and Russia. Secretary of State Rex Tillerson and President Trump have been definitive that further military action could be taken. Russia, meanwhile, has sent a warship towards the two U.S. destroyers in the Mediterranean that fired the cruise missiles. Russia also suspended two key military agreements designed to reign in potential Russia-U.S. conflict in Syria.

President Trump Meets with Chinese President Xi

President Xi Jinping

In more news of heightened geopolitical tension, President Trump hosted Chinese President Xi Jinping at Mar-a-Lago in a two-day summit. The aim of the summit was to alleviate some of the tension between the world leaders. Some of these tensions revolve around Trump’s accusations of unfair Chinese trade policy, Chinese military build up in the South China Sea, and “One China” policy.

The hot issue, though, between the two countries that got (it seems) less attention was that of North Korea. In the wake of more ballistic missile tests from North Korea, Trump has taken to Twitter to call our China for not “reigning in” the rogue nation and announce that the U.S. will deal with it alone, if need be.

What this means for investors: Gold was up ahead of the Trump-Xi summit as investors saw risk and uncertainty for the markets. Stocks pulled back. It is no coincidence that North Korea’s latest ballistic test was timed so close to the Chinese summit. It is probably also no coincidence that Trump’s show of force against Syria was made more impactful by the timing of the summit. Regardless, expect fear in the markets over heightened tension in these regions.

Markets Spooked By the Federal Reserve Last Week

Federal Reserve Building

 

Gold also got a boost from the news of the Federal Reserve’s release of the minutes from the latest FOMC meeting. The minutes indicate that there will be another quarter point rate hike, but also that the Fed is getting nervous that the market is overvalued. The Fed wants to reign in reign in their policy of re-investing in Treasury bills and mortgage backed securities soon. After the financial crisis, the Fed bought these to keep interest rates low in an effort to boost economic growth. Now they want to reduce that balance sheet.

What this means for investors: Jamie Dimon and Larry FinkIf the Fed is trying to get an overvalued stock market to correct, gold demand is going to go up. Many analysts have been saying for sometime that equity market is overvalued. Two of the most influential financial CEOs – say the economy is flashing ominous signs of slowing, despite the stellar rallies that extended into the beginning of 2017. Now is the time to prepare your portfolio for this potential downturn.

Jobs Data Report Misses Expectations

US Jobs and Labor ForceThe Labor Department released its jobs data report for March on Friday. The numbers fell short of expectations, which caused stocks and the dollar to pull back. 98,000 jobs were added, but economists had been projecting 180,000. It came as something of a shock, given the robust figures for January and February. Perhaps the outlook for business growth is not as promising as it appeared at the start of the year.

What this means for investors: Investors are starting to fear that the Trump rally could be coming to an end. The unemployment rate fell marginally despite the weak growth, but earnings were also down. The weaker dollar that accompanied the report’s outlook gave a boost to gold and silver.

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 Here are some articles from the web discussing the topics in this week’s post:

Gold Surges after Airstrikes in Syria

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President Trump’s Meeting with Chinese President Xi

Read Here

Markets Spooked By the Federal Reserve Last Week

Read Here

Jobs Data Report Misses Expectations

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

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