Gold Spikes On Foreign Policy Fears

Wednesday, April 12, 2017

gold blocksIt’s not often in this space that we can report big spikes in the price of gold—or big movements in that price in either direction. But this has been no ordinary week in the news: US actions in Syria have raised tensions in the Middle-East—and if there’s anything that tends to send investors flocking to the yellow metal, it’s political and economic uncertainty. In this case, it’s political uncertainty sending gold to new heights.

Tracking The Improvement In Gold’s Price

It was late last week—on April 6th, in fact—that the US launched missiles against Syria in response to a chemical weapons attack. Now that we’ve entered mid-week in the following week, we can see that the weekly market reaction shows a spike in the price of gold:

Chart courtesy of APMEX.com.

Is this a direct correlation between the news and the price of gold, or a happy coincidence? In order to answer that, we’ll have to look at some of the other popular factors that influence the price of precious metals.

The Response Of The US Dollar Index

Perhaps the most important of those factors is the US Dollar, in which the price of gold (  http://www.gold-eagle.com/rate/price-of-gold/ ) is measured. As the dollar sinks, it tends to mean gold has gone up—and vice versa. And looking at the MarketWatch charts, we see the following reaction of the index since the news from Syria:

Chart courtesy of MarketWatch.com.

Although the increased US Dollar, which spiked on Friday, did temporarily hold down the price of gold, it’s increasingly clear that the markets had a very specific reaction to the news: the US Dollar went down slightly and the price of gold increased slightly. That’s to be expected after international news like what we saw late last week. Indeed, the commodity of oil is currently enjoying a post-news spike as well.

Watching Headlines To See Where Gold Goes

When making predictions about gold, the caveat that breaking news can always send gold tumbling or rising is usually included—and the previous week’s events are a fine example of why that’s the case.

If the story of rising tensions across the world is where we have to go to find our prospects for an investment of gold, then that can be just as important to watch as any economic indicator. After recently wrapping up the first quarter—generally a healthy quarter for the yellow metal—it appears that the second quarter of 2017 isn’t going to be nearly as smooth. The Dow Jones Industrial Average may have spent all of its momentum. Now, as investors grow nervous over the prospects of war, we can expect that this news will drive upward pressure on investments like gold and oil.

But where that news will head is anybody’s guess, which means that trying to project the future of gold in the current climate is speculative at best. The best thing to do now is wait and see what unfolds in the headlines, even if those who have already purchased gold feel a little bit more secure about their portfolio.

Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.