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Don’t Overlook Geopolitical Risks That Could Give Gold A Boost - Saxo Bank

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Don’t Overlook Geopolitical Risks That Could Give Gold A Boost - Saxo Bank

(Kitco News) - Markets are very much preoccupied with volatility in the equity space at the moment and many investors are overlooking serious geopolitical risks, which could push gold prices up, according to Saxo Bank.

“The market is so focused on NASDAQ volatility that a lot of geopolitical risk is being ignored,” chief economist at Saxo Bank Steen Jakobsen said in a note published on Tuesday.

Jakobsen pointed to the friction between Israel and Iran as something to keep a very close eye on.

“Israel and Iran are now directly facing off each other, whereas in the past it was through a proxy. [And] the Israelis are very vocal on their next move.”

The most recent incident came as Israel downed a drone that came from Syrian territory, which Israel claimed to be Iranian.

What followed was a quick escalation of events in which Israel launched a strike, hitting the alleged drone’s base in Syria. But, its F-16 jet was shot down in the crossfire that ensued, which was the first time an Israeli aircraft was downed by enemy fire since 1982.

This led to a harsh Israeli response, with Brig. Gen. Amit Fisher, the Israel Defense Forces chief responsible for the Syrian border, stating on Sunday: “We need to prepare ourselves operationally and intelligence-wise for the mounting threat. The big test will be the test of war.”

In the meantime, Jakobsen noted that there is a brewing trade war between the U.S. and China that needs to be monitored as well.

“We are days away from an escalation into trade war with Section 301,” he said, citing the former acting deputy U.S. trade representative Wendy Cutler as saying that punitive trade action against China is “imminent.”

But, Danish bank’s short-term trade advice is: “Long @spot w. 1319.40 stop.”

“The risk to this trade is U.S. inflation data tomorrow which could decide risk return in Q1,” added Jakobsen.

Gold prices had a good day on Tuesday, with April Comex gold finishing the North American session modestly up amid mild safe-haven demand. April futures were last at $1,333.90, up 0.26% on the day. 

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