Gold Resists Strikes / Commodities / Gold and Silver 2018

Boom! The U.S. and its allies struck Syria in responseto a suspected deadly chemical attack several days ago. Gold should be the safehaven in such situations, right? But the price of gold was practicallyunchanged on Monday. What happened?

U.S. StrikesSyria. Gold Yawns
A lot has happened in recent days. Luckily, we havekept an eye on the most important developments for you, so let’s analyze theirpotential impact for the gold market. First of all, Syria is again on theinvestors’ radar. Or actually on the military’s radar – on Friday, the U.S.lead allies – France and the UK – and launched a missile attack on Syria for analleged chemical weapon attack on a town near Damascus on April 7. It wasprobably the most significant attack against President Bashar al-Assad’sgovernment by Western powers in seven years of Syria’s civil war, so investorsworried about the repercussions.

Some analysts even argued that Syria was a seriousthreat for a world and that the rising tensions in the Middle East would bebullish for gold. Well, we were skeptical about this interpretation. We alwaysrepeated that geopoliticalthreats provide only temporary support forgold prices, at best. And indeed, U.S. futures rose yesterday, while goldprices remained practically unchanged, as one can see in the chart below.

Chart 1: Gold prices from April 13 to April 16, 2018.

Why didn’t the airstrikes move gold? And why wouldthey? You see, as we always emphasize, themarkets are driven by expectations and often buy the rumor and sell thefact. Gold smells war. Indeed, the wave of strikes on Syria was priced in lastweek – and it is why the price of gold didn’t rally yesterday.

Moreover, some military strategists point out thatstrikes were very precisely conducted, with no Russian targets hit. It is arather good sign that the Western powers do not want an escalation of theconflict. So gold may not even have theopportunity to shine as a safe-haven, actually.

Retail SalesBounce Back in March
In the long run, macroeconomics trumps geopolitics. Sowhat has recently changed in the macroeconomic outlook? Well, on Monday, theCommerce Department published the report on March retail sales. They rose 0.6percent last month, following s 0.1 percent decline in February. The reboundwas expected, but the actual number beat expectations. The recovery will nothelp the first quarter too much, but it suggests that the U.S. expansion willcontinue. Which is not good news for the gold market – moderate economic growth could keep the yellow metal within arelatively narrow trading range.

InflationSpeeds Up in March
Inflation is looming on the horizon. We know that itmay sound strange, given that the CPI fell 0.1percent in March. But the yearly rate of inflation actuallyrose from 2.2 percent to 2.4 percent, hitting a one-year high. And what is mostimportant: core CPI, which excludes volatile energy and food prices, advanced0.2 percent in March. On an annual basis, core inflation climbed from 1.8percent to 2.1 percent, the highest level in more than a year.

What does it mean for the gold market? Well, higherinflation could finally boost gold, which is considered to be an inflationhedge. On the other hand, the rise inprices is not likely to blast off into space. And if it accelerates, the Fedcould raise interestrates more aggressively, which couldactually exert downward pressure on gold prices.

Implicationsfor Gold
War will break out in the Middle East. Buy gold. NorthKorea will bomb New York. Buy gold. Trade conflicts will lead China to sell allAmerican securities. Buy gold. The apocalypse is coming. Buy gold.

Have you heard such opinions? We have. For years. Noneof these prophecies have come true. It’s not surprising as these “analyses” arenot based on facts, but on the investors’ fears and sales techniques. But wedon’t sell gold. We provide accurate research for investors on true golddrivers. Geopolitical risks have little impact on the precious metals market.Macroeconomic factors are much more important. The implication is that thecurrent renewal of the Syrian conflict shouldn’t significantly affect goldprices. The continued economic expansion with rising inflation will likely bemore important, as well as the changes in the U.S. dollar’s strength. So staycalm and avoid the sowers of fear!

If you enjoyed the above analysis and would you like to knowmore about the gold ETFs and their impact on gold price, we invite you to readthe April MarketOverview report. If you're interested in the detailed price analysis andprice projections with targets, we invite you to sign up for our Gold & SilverTrading Alerts . If you're not ready to subscribe at this time, we inviteyou to sign up for our goldnewsletter and stay up-to-date with our latest free articles. It's freeand you can unsubscribe anytime.

Arkadiusz Sieron
Sunshine Profits‘ MarketOverview Editor

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