Boom! The U.S. and its allies struck Syria in response to a suspected deadly chemical attack several days ago. Gold should be the safe haven in such situations, right? But the price of gold was practically unchanged on Monday. What happened?
U.S. Strikes Syria. Gold Yawns
A lot has happened in recent days. Luckily, we have kept an eye on the most important developments for you, so let’s analyze their potential impact for the gold market. First of all, Syria is again on the investors’ radar. Or actually on the military’s radar – on Friday, the U.S. lead allies – France and the UK – and launched a missile attack on Syria for an alleged chemical weapon attack on a town near Damascus on April 7. It was probably the most significant attack against President Bashar al-Assad’s government by Western powers in seven years of Syria’s civil war, so investors worried about the repercussions.
Some analysts even argued that Syria was a serious threat for a world and that the rising tensions in the Middle East would be bullish for gold. Well, we were skeptical about this interpretation. We always repeated that geopolitical threats provide only temporary support for gold prices, at best. And indeed, U.S. futures rose yesterday, while gold prices remained practically unchanged, as one can see in the chart below.
Chart 1: Gold prices from April 13 to April 16, 2018.
Why didn’t the airstrikes move gold? And why would they? You see, as we always emphasize, the markets are driven by expectations and often buy the rumor and sell the fact. Gold smells war. Indeed, the wave of strikes on Syria was priced in last week – and it is why the price of gold didn’t rally yesterday.
Moreover, some military strategists point out that strikes were very precisely conducted, with no Russian targets hit. It is a rather good sign that the Western powers do not want an escalation of the conflict. So gold may not even have the opportunity to shine as a safe-haven, actually.