Gold Price Inches Up on Russian Retaliation Fears

Precious Metals
Gold Investing

Gold edged up early Monday morning due to Russian retaliation fears. Gains were capped as concerns over a wider conflict eased.

The gold price climbed 0.33 percent on Monday morning (April 16) following concerns that Russia may retaliate over Saturday’s (April 14) Trump-ordered strikes on Syria.

The strikes, led by the US, UK and France, targeted three facilities associated with Syria’s chemical weapons program in response to an alleged gas attack by government forces on the town of Douma. The yellow metal rose prior to the strikes, but fell in the aftermath.

Now that the strikes have occurred, Naeem Aslam, chief market analyst at Think Markets, says gold is poised to gain as “the focus will be on the counter-reaction from Russia.”

Aslam believes that the price of gold could rally toward US$1,400 per ounce due to its safe-haven tendencies during times of political and economic uncertainty.

However, there is a cap on how high the price can rise due to financial markets betting on air strikes on Syria not escalating into a wider conflict.

“Some of the risk (premium) has come down following the air strikes,” Capital Economics analyst Simona Gambarini said. “Some market participants were thinking that maybe there could be an escalation of the tensions, but that has not happened and therefore prices have come down a bit.”

Jonathan Butler, strategist at Japanese conglomerate Mitsubishi, predicts that markets will still keep their focus on political tensions.

“Such tensions can quickly be priced out if the situation eases … [but] just as crude oil prices have taken strength from the current geopolitical situation, rising to a 3-year high … so too we expect precious metals to remain well supported as traditional safe-havens,” he said.

Butler also noted that the potential of a trade war between the US and China will keep gold prices in the green. “We have certainly not heard the last about [US-China] trade wars,” he said.

As of 12:27 p.m. EST, gold was up 0.25 percent, trading at US$1,348 per ounce.

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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.

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