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Anzo Lim

Gold: The Market May Be Underestimating the US-Iran Conflict

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The US stocks soaring above historical record seem to suggest that the conflict between US and Iran has been over, yet situation in the Middle-east remains tense. Looking ahead, Middle-east faces emerging geopolitical risks that are underestimated by the market, and arranging safe-haven assets such as gold and Japanese yen can be an important way of hedging such risks.  


After the US launched an air strike on January 2nd that killed Iranian senior government official Qasem Soleimani, Iran quickly took revenge 5 days later by attacking several US military bases in Iraq, leading to further escalation of the tension between the two countries. The market plummeted upon the breaking of the news, while oil price surged as the Wall Street worried about whether Iran will target areas with rich oil reserve.


Because market volatility and oil prices surge may affect decisions on diplomatic policies, Irans continuous retaliation may lead to severe consequences.


If the conflict further escalates within the US election year, leading to serious market volatility and pulling allies away from the US, President Trump is more likely to seek a resolution similar to the Joint Comprehensive Plan of Action(JCPOA). Escalation of the conflict before the election, though the market has not yet release any assessment regarding major upcoming risks.


Daily Pivot points for gold: 1552-1554


S1: 1548              R1: 1560


S2: 1541             R2: 1565

Edited by Anzo Lim

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