Rising gold prices often signal turbulent economic times. With 10 percent gains in the first quarter of 2017 alone, gold is rallying against expert expectations. The European Union is still struggling with internal conflicts and burdened central banks. American and Chinese economies were at loggerheads and experts were anticipating a trade war. However, Syria airstrikes have now become the biggest political and economic issue globally. In times like these, the yellow metal is shining as anxious investors look for hedges and safe havens.
Syria Strikes Bring International Trouble
Last week, POTUS Donald Trump met Chinese President Xi Jinping in his private resort in Florida. Soon after the lackluster meeting between the two ended, the US ordered airstrikes in Syria. This attack is said to have created tensions between US and Russia, an ally of Assad’s government in Syria. Beijing was also left stunned after this sudden move. Note that China is another Assad ally.
Rex Tillerson, the US Secretary of State is visiting Moscow for Syria war negotiations. However, no solid results are seen. Instead, Russian President Putin has publicly criticized the US, citing that the Americans are planning strikes in Damascus.
More Geopolitical Tensions Ensue
China and the US already share a tense relationship. With Syrian airstrikes, the Chinese were shocked. Now, they also must come to terms with their association to North Korea. US has made clear that a solution to the Korean problem will bring favorable trade from the US. Consequently, a US Navy strike is approaching the Korean peninsula. Europe, on the other hand, is troubled with looming debts, Brexit and rise of separatists.
Gold has had a chance to shine this year as international politics is more troublesome and unpredictable. The chances of a third World War are being denied but there is no shortage of groups that propose the rise of a devastating war engulfing multiple countries. As fear ensues in investors, they are flocking to gold. The 200-day moving average for gold shows that prices may rise further.
Gold options trade is also experiencing a hike. In fact, the options price swing is the highest in three months. All these factors show that gold will continue a bullish trend this year as well. The futures market is showing a more bullish picture as June delivery futures are now up to $1,274.20 for an ounce. Bullion is also reaching above the 200-day average.
Fearful investors are looking for gold in hope for safe capital. It seems that returns are not a priority but capital safety is.