Here Is How To ‘Properly Diversify’ Amid Rising Iran Tensions - Analyst
(Kitco News) - The U.S. decision to pull out of the Iran nuclear deal means increased market volatility, and investors need to make sure “they are properly diversified,” said one analyst, adding that he sees gold rallying in the short-term.
“There will be global stock market sell-offs as the world adjusts to the news,” deVere Group international investment strategist Tom Elliott said in a note on Tuesday.
U.S. President Donald Trump announced on Tuesday that he is withdrawing from the Iran nuclear deal, reinstating “U.S. nuclear sanctions on the Iranian regime,” and introducing “the highest level of economic sanctions.”
Trump described the 2015 international agreement as a “decaying and rotten structure” that is “defective to its core.”
In the short-term, Elliott projects gold prices will rally as markets digest the news itself as well as any additional geopolitical fallout.
“Due to the severity of the U.S. President’s approach, in the shorter term at least it is likely gold and the U.S. dollar may rally on growing fears of further conflicts in the Middle East breaking out; and risk assets, namely stocks and credit markets, may weaken. Oil may rally strongly,” he wrote.
The rally might even find long-term support if Iran takes on a more aggressive approach, Elliott added.
“I expect that [Iran] will try to continue to appear the reasonable partner and work with Russia and the Europeans, playing them off against the U.S. If they take a more aggressive stance, oil, gold and the dollar will go considerably higher,” according to the strategist.
In order to benefit the most from this kind of unstable environment, Elliott suggests that investors diversify.
“Geopolitical events such as these underscore how essential it is for investors to always ensure that they are properly diversified - this includes across asset classes, sectors and geographical regions – to mitigate potential risks to their investment returns,” he said.
As Asian markets opened on Wednesday following Trump’s announcement, gold prices dropped, with spot gold on Kitco.com trading at $1,310.90 and June Comex gold futures were last at $1,310.90, down 0.21% on the day.