Missiles Over Syria: A One-Shot Deal for Gold?Johnathan Douglas
The recent missile strikes on Syria have had a notable impact on the markets, with currency pairs wobbling and the U.S. dollar dipping in most markets as a result. Similarly, weak data from the UK caused the dollar to rise significantly against the pound, and the euro didn’t show much change. The yen, on the other hand, experienced a significant fluctuation, and the dollar dropped against it.
Uncertainty in Wake of Missile Strikes
Current currency speculation seems to indicate that the missile strikes have had minimal effect, with other data taking precedence, but post-strike uncertainty is definitely showing up in the markets. Part of that uncertainty may be because it’s unclear whether this is a concerted attack against Syria, resulting in a potential Iraq-like war, or whether this is a one-off strike as a result of the alleged violations by the Syrian regime. Unknowns about how Russia and China will react economically and militarily to the events has, however, resulted in the markets battening down some.
Current Movement of Gold and Investments
Gold markets are pricing in a slightly increased risk of potential crash in the stock market at the moment, although this may be alleviated by the missile strike. The FTSE is considered overvalued by some, as is the Dow Jones, but both dropped slightly in the wake of the strikes. Part of this is driven by fears that oil prices may rise due to heightened tension in the Middle East, but the current Trump administration focus on passing through Keystone XL and the current shale deposits in the northern United States may alleviate price hikes.
Technical analysts have noted that the S&P 500 briefly tested the 2,350 mark and settled, so the stronger dollar likely had more effect on this index than Syria. Unsurprisingly, as often accompanies military action, shares in firms that deal with military supplies, particularly Boeing and General Electric, have risen slightly, and those with particular interests in the Middle East, such as ExxonMobil, DuPont and Chevron, have fallen somewhat.
This all indicates that investors are waiting to see what happens next as markets fluctuate. Should there be further military action, you may expect to see oil prices rise, with both the West Texas Intermediate crude and Brent crude prices potentially climbing to one-year highs. As a result of one strike, prices have already jumped to one-month highs. This would have a knock-on effect on transport and overall prices, particularly those dealing with plastics and fossil fuels. Should this be a one-time strike, it’s likely that prices will settle again once the uncertainty has passed.
It’s unsurprising that many investors are shifting assets into gold, resulting in a price rise. Gold acts as a significant hedge in times of uncertainty, and this sudden strike has created a substantial amount of that. Regardless of geo-political events, gold and other precious metals are always a strong foundation for investment and savings.