Military Action in the Middle East Ferments Instability
A U.S. airstrike against a government-controlled airfield in Syria has caused gold prices to climb, hitting $1,265 per ounce.
More than 50 missiles were launched at the airfield, seen as a direct response to news that a chemical weapon attack had been launched from that airbase against Syrian civilians. The Syrian government and Russia have vehemently denied the use of chemical weapons, with Russia painting the U.S. attack as a ploy to distract from civilian deaths in Iraq. (Source: “Trump Orders Syria Airstrikes After ‘Assad Choked Out The Lives’ Of Civilians,” NPR, April 6, 2017.)
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Gold prices are now at the mercy of politics, with further instability likely to push the hedge asset higher. As American involvement in Syria either continues to escalate or winds down following this attack, gold prices are likely to be volatile in direct proportion to the political instability.
Many nations are vying for control and influence over the Syrian Civil War, which has now been ongoing for six consecutive years. Any involvement in the region will have far-reaching, international implications. Gold prices will be the beneficiary of this turmoil, as investors often flock to gold in unpredictable times, looking for more stable assets.
The attack comes as U.S. President Donald Trump wraps up his first meeting with Chinese President Xi Jinping in Florida. The two met on Thursday and continued their talks on Friday, likely covering a variety of issues from North Korea to the Syrian crisis.
The Trump-China talks will also have an effect on gold, as Trump’s aggressive tone in regards to a potential trade war with China during the campaign will be hashed out over the meeting.
At the moment, the widespread political upheaval is a boon to gold prices, as the uncertainty will push investors to find refuge in gold as a risk-management investment. Expect any further developments in the political arena to have a direct influence over gold prices.
