Gold and Oil to Pause and Await US Response

After a few days of solid gains in oil prices and gold, it will likely be time for a retracement to unfold today in line with the absence of further Mid-east aggression.

Iran’s attack on US air bases in Iraq are the equivalent of a passive aggressive fart in the wind, geopolitically speaking. Deeming the response “proportionate” to the assassination of General Qassem Soleimani, the missile attack that landed somewhere between 12 and 15 ICMB’s has nonetheless caused a safe haven stampede of sorts in the event of further escalation.

Today will tell whether or not the US embodied by Trump is satisfied with the situation, though it would appear that, absent any casualties on the American side, there will not likely be any immediate ratcheting up of the rhetoric or further strikes on either side. This will have an ameliorating effect on the prices of gold and oil, and so traders will likely be banking more heavily on the short side than the long.

But what of the longer term?

There has been no visible comment out of Russia or China since the missile strikes, even as joint naval exercises among Russia China and Iran proceed in the Gulf of Oman.

More than likely, that eastern axis will merely exploit incrementally the fanned flames of resentment against America and Americans, and allow the continued American hegemony in the Middle East incubate longer term resolve against the US.

On the other hand, the degree to which Trump’s timing of the Soleimani execution was calibrated to distract from his impeachment issues at home might be an invisible factor in determining what the next step for Trump might be. If the situation disappears too quickly into the news cycle rear view mirror, he may feel emboldened to target additional threats and unilaterally execute some action against them.

Additionally, Trump may feel further encouraged to keep the military actively seeking targets as he perceives the approval for his actions from his fan base has a crystalizing  effect on his prospects for a 2020 electoral victory.

Either way, gold and oil have demonstrated this week that they both remain very reliable safe havens for investors in response to political violence around the world.

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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