Gold Prices Drop As Markets Focus On Russia’s Possible Syria Strike Retaliation
(Kitco News) - Gold began to decline as soon as Asian markets opened early on Monday, with traders waiting for possible retaliatory moves from Russia after U.S., France, and Britain launched air strikes on Syria over the weekend.
One hundred and five missiles targeted alleged chemical weapons facilities in Syria.
The American, French, and British military action was in response to a chemical attack in the Syrian city of Douma on April 7.
The western countries said Assad was to be blamed for the poisonous gas attack, which killed dozens of people. But, the Syrian government, as well as its ally Russia, have denied any involvement.
Analysts said that the first round of strikes on Syria was priced in last week, which is why gold prices might not rally in reaction to the move, but added that any additional strikes could significantly move the precious metal.
“The first attack was within expectations and was already priced in the market ... However, if there is a second round of strikes, that is not in line with expectations. So that should prompt a sharp risk-off move in markets,” chief market analyst at Think Markets Naeem Aslam told Reuters on Sunday. “The focus will be on the counter-reaction from Russia.”
Another strategist said that Western strikes on Syria were “surgical, followed by a pullback,” which could be a calming sign for the markets. “Reports show a lot of care was taken not to hit Russian targets, which is a good sign and the market should take heart from that,” Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers, told Reuters.
U.S. President Donald Trump tweeted out “mission accomplished” following the air strikes on Syria, while U.S. Lieutenant General Kenneth McKenzie admitted that he could not guarantee that all of Syrian chemical weapons capabilities were neutralized.
In the meantime, Russian President Vladimir Putin issued a warning on Sunday, stating that if the West is to target Syria again, it would lead to “chaos.”
“Vladimir Putin, in particular, stressed that if such actions committed in violation of the U.N. Charter continue, then it will inevitably lead to chaos in international relations,” the Kremlin said in a statement.
Gold has benefited from last week’s safe-haven demand amid increasing geopolitical risks. And analysts are not ruling further gains as North American markets open later in the day.
“Risk hedging helped underpin gold prices last week, with bullion rising to new 3-month spot highs of $1,365 as international outrage and condemnation followed a suspected chemical gas attack in Syria,” Mitsubishi Corporation’s precious metals strategist Jonathan Butler said in a note published on Sunday.
“Following targeted air strikes by the U.S., U.K., and France … gold is likely to begin the new week strongly on geopolitical tensions, though such tensions can quickly be priced out of the situation eases,” Butler added.