The most peculiar market move in an alarming week of Middle East conflict was how the most obvious "safe haven" - gold - flubbed its lines. Instead of piling into gold, investors seemed to sprint for dollar cash, offloading anything that caught a speculative head of steam before last weekend's attacks. Three days after Saturday's attacks on Iran, the initial bid for precious metals faded quickly. On Tuesday, there was a major reversal, with gold suddenly falling 4% and silver dropping as much as 10%. The Reuters Iran Briefing newsletter keeps you informed with the latest developments and analysis of the Iran war. Sign up here. Advertisement · Scroll to continue
Sponsored by LinkedIn for Marketing Boost your event with confidence Running an event on LinkedIn? Use your existing event page to create an ad. No new assets, no complex setup. Just more reach, more signups, more impact: https://lnkd.in/drQcwUXr Learn more
A line chart with the title 'Spot gold price in USD per oz' A line chart with the title 'Spot gold price in USD per oz' A return of the dollar's long-lost "safety bid", which saw the greenback (.DXY), opens new tab climb this week despite heavy losses in U.S. stocks and bonds, was cited as one basic reason for gold's reversal. Both public and private funds in the Middle East region now facing Iranian retaliatory strikes may be opting for dollar liquidity. A spike in dollar-denominated oil and gas prices may also have spurred demand for cash in the world's reserve currency. Shows U.S. fund flows Shows U.S. fund flows The main reason for the dollar rise, however, is most likely the hit to major European and Asian economies from a protracted energy supply disruption and price spike compared with the relatively insulated U.S. Advertisement · Scroll to continue
Sponsored by LinkedIn for Marketing Boost your event with confidence Running an event on LinkedIn? Use your existing event page to create an ad. No new assets, no complex setup. Just more reach, more signups, more impact: https://lnkd.in/drQcwUXr Learn more
Either way, a rebounding dollar takes the shine off gold. But there are other possible reasons for gold's "no-show" so far this week. One is gold's correlation with the Swiss franc . Both are traditionally the safest of safe havens in stressful times and get bid up in tandem - especially now that others such as Japan's yen and U.S. Treasuries have been neutralised as such in recent years. But an extraordinary warning of franc-selling intervention from the Swiss National Bank on Monday quickly reversed the currency's gains against both the dollar and the euro. The resulting unwind of haven trades may have added pressure on gold.
