After the bombs landed, gold has hit a 5 month peak as investors look for safe havens.
Other safe havens such as the Japanese Yen have also rallied against the dollar.
While he is posturing on the global stage, reacting to public outrage at Assad’s supposed use of chemical weapons in Syria, Trump’s actions are having reverberations in other sectors too.
Pre-Summit Jitters Affecting the Market
In 4 of the past 5 sessions, gold has risen in value. At the end of the Thursday session, the per ounce value had risen to $1,248.50. That is an increase of $4.80 or 0.4%. It’s worth noting that investment in gold was rising across the week despite good economic news elsewhere such as a 25,000 drop in unemployment, treasury yields remaining high, and a 0.02% rise in value of the dollar.
It is clear, therefore, that the upcoming Xi summit in Florida, where for the first time, Trump will negotiate with China, is causing investors to worry.
That worry just got worse. According to Lear Capital, Gold is a natural safe haven in times of worry because it is of consistent, high value and has been for millennia back to the ancient Roman empire whose currency value depended on the number of coins stamped per measure of gold. Gold will always be of high value, so is a stable stock to trade in if other markets are jittery.
Bravura Messes the Markets Up – Does Nothing for Syria
The missile strikes just added to that sense of investor insecurity.
After the rockets were launched against Assad’s air bases, gold spiked 1% in value after a spate of safe haven buying across the world. According to the FT, when the first Asian markets opened up post-missile strike, investors fled from the dollar and other affected currencies into the Yen safe haven. The Yen rose 0.2% to Y110.57 to the dollar. Both were trading at losses prior to the announcement of the military strikes.
These two safe havens may have benefitted from the Xi-Trump summit and the military strikes, but their paths are likely to diverge. Most thoughts on the strikes will look at U.S.-Russian relations or the futility of the strike in Syria which may have actually benefitted the Islamic Terrorists more than the Allies without denting the Syria-Russia-Iran axis.
However, Trump is meeting Xi of China today with 2 things on his mind – Sino-American trade with a specific focus on manufacturing jobs in the rust belt, and North Korea. Trump’s action is posturing and theatre to get a good deal out of Xi on both accounts.
He’s proven he’s willing to bomb places and won’t baulk at bombing North Korea and is basically saying give me something good or we’ll put tariffs on Chinese goods. The rust belt could benefit, the American economy could benefit (but at what cost), but East Asia will be less stable and the Yen will fall.