Gold Hit Its Highest Close in 2 Years
On Wednesday, gold hit its highest close in 2 years. Gold started the week at around $1,335, climbed to over $1,350 mid week, and settled around $1,345 by Friday. Silver finished the week just shy of $16.70. Silver looks poised for surge right now, in fact. Gold is hanging on to recent gains, and the gold-silver ratio (the amount of ounces of silver needed to equal an ounce of gold) is narrowing. It’s a bullish indication for silver right now.
What this means for investors: Gold’s recent rally has been due in large part to uncertainty over trade war fears with China. This week it was bigger fears over actual war in Syria that propelled gold higher. There was some pull back Thursday due to the Fed announcing interest rates, but for the most part gold’s rally remained consistent. Late Friday the U.S., U.K., and France launched around a hundred missile strikes at Syrian facilities. The rush to safe haven gold will likely continue through the next week.
Crisis in Syria, Missile Strikes, and Heightened Geopolitical Tension
Threats of military action and retaliation between The United States and its allies and Russia and Syria were a significant mover for gold and the markets this week. Images and reports came out of an alleged chemical attack by Syrian President Bashar Al-Assad on civilians (days after Trump announced potential withdrawal of U.S. troops). The United States and allies like France and the U.K. denounced the attack and threatened military action against the Syrian regime. Russia, Syria’s primary ally, declared that it was not an attack by the Syrian government. Russia stated it was more likely the work of government opposition fighters or perhaps even staged. President Trump responded forcefully, and even went as far as to tweet to Assad that “smart missiles may be coming.”
Russian ships at Tartous Port in Syria immediately left port after the news to begin exercises offshore while the U.S. sent aircraft carrier the USS Harry S Truman to join the U.S. sixth fleet in the Mediterranean. Russia has warned the U.S. about retaliation if the U.S. were to target the Assad regime with strikes. Yet late Friday, the U.S., France, and the U.K. launched a joint missile strike against Syrian facilities rumored to be responsible for chemical weapon manufacturing. Russia condemned the strikes in the strongest terms.
What this means for investors: As foreign military presence increases, likelihood of all out war between powerful countries increases. There is no shortage of Iranian, U.S., French, and Russian military bases in Syria now as this map shows. Buyers will continue flocking to gold as tensions continue to ramp up. As Russia, and the U.S. all vie for influence in Syria, the chance of peaceful resolution seems less likely.
Not Just War Fear Driving Gold
However, it wasn’t just the bellicose rhetoric and that spurred gold prices this week. Gold certainly reacted to the fear of war with Russia, but a weak dollar is driving gold up as well. Weak inflation data also helped push gold higher on Wednesday in addition to the Syria worries.
What this means for investors: Even if military action is not as imminent as the markets seemed to fear this week, gold is still looking bullish. Some strategists suspect that the inflation data may make the Federal Reserve slower to raise interest rates. However, the Fed has yet to say anything to the contrary. Jobs data last week was also reported to be lower than expectations. A weak dollar, indications of some slowing growth, and the choppy couple months the equity markets have had all point upwards for precious metals.
Gold Taking Defensive Spotlight Back from Cryptocurrency
As defensive plays for protecting wealth took the spotlight this week, gold was clearly preferred by strategists over bitcoin and other cryptocurrencies as an alternative wealth storage option. Gold hit its highest close in 2 years as uncertainty rocked the markets, and cryptocurrencies continued to see investors move out of them and into physical gold.
What this means for investors: It’s not just geopolitical uncertainty and crypto disillusion that’s going to drive metals though. This gold rally has been years in the making. Check out this video to see more.
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