Gold rises on back of US Syria strike reports ETF Securities

ETF Securities reports that investors poured USD42 million into long gold ETPs as sentiment turned bearish following the launch of US missiles strikes on Syria in response to the chemical attack.

The firm writes that in turn, Russian President Putin condemned the US air strikes on Syria and suspended its agreement with the US to avoid hostile standoffs in the Syrian airspace, and the resulting escalation of tensions between the US and Russia led gold price to rise 1.7 per cent to USD1,270 an ounce on the news, the highest level since last November, posting a 10 per cent increase year-to-date.

“What’s more, the 10yr US Treasuries yield is down 3bps to 2.31 per cent also reflecting defensive strategies and a weaker-than-expected US employment report (nonfarm payrolls came at 98k versus a consensus of 180k). After five consecutive weeks of inflows, crude oil ETPs saw USD19 million of outflows as investors secure profits. The unexpected rise of US inventory by 1.6 million barrels was not enough to offset the positive price-effect from the current production outages in the North Sea and Canada.

“Besides, oil prices jumped as much as 2 per cent in intra-day trade in reaction to the news of US military strikes on Syria. We believe that was an overreaction as Syria is not a significant producer of oil. Market concerns may be more centred around how Syria’s allies such as Russia and Iran will react. But with Iran able to increase production while other OPEC members are cutting. Russia is still far from cutting production back enough to meet its obligations under the OPEC/nonOPEC deal. We see a short-term correction to oil prices after the knee-jerk reaction to this missile strike.”

Industrial metals ETPs saw USD11 million of inflows reflecting stronger global macroeconomic data. Industrial metals prices found support from improving economic data and rising stock markets. However, metals prices edged down slightly after the news of US air strikes on Syria, reflecting the rotation from cyclicals to defensive assets, ETF Securities writes.

“Last week there was USD18.8 million of outflows from short EUR ETPs, while long EUR ETPs saw USD3.2 million in inflows. Investors’ sentiment toward the euro may be edging upward after ECB President Draghi stated that “the recovery is progressing and now may be gaining momentum" at a conference at Frankfurt's Goethe University last Thursday.”

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Beverly Chandler
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