gold investment, silver investment

arkadiusz-sieron

Saudi Purge and Gold

November 7, 2017, 9:29 AM Arkadiusz Sieroń , PhD

Over the weekend, there was a purge in Saudi Arabia. What does it imply for the gold market?

It was a surprising weekend for Saudi Arabia. On Saturday, Crown Prince Mohammed bin Salman launched an anti-corruption probe, arresting several princes and dozens of government ministers, including Prince Alwaleed bin Talal, one of the wealthiest men in the world. These detentions fundamentally altered the structure of the state which has existed since the 1960s, as they were done as part of the consolidation of power by the son of King Salman.

Separately, Prince Mansour bin Muqrin, an important member of the Saudi royal family, and a few other government officials were killed in a helicopter crash on Sunday.

Meanwhile, the last few days also highlighted rising tensions in the region. On Saturday, Saudi Arabia intercepted a ballistic missile. The kingdom blamed the launch on Iran. And on Monday, Saudi Arabia said that Lebanon had declared war against it.

In a response to this series of bizarre news, the price of oil surged. Indeed, the WTI futures jumped above $57 a barrel, as one can see in the chart below.

Chart 1: Crude oil WTI on Nymex over the last three days.

Crude oil WTI on Nymex over the last three days

The combination of surging oil prices and a safe-haven demand due to geopolitical tensions made gold prices rally. As the next chart shows, the price of the yellow metal rose above $1,280 yesterday.

Chart 2: Gold prices over the last three days.

Gold prices over the last three days

The jump in oil prices and the rise in uncertainty may support gold prices (crude oil often leads the commodities and its price spikes significantly add to inflationary pressures). However, yesterday’s moves may be only temporary as the events in Saudi Arabia may not change the country’s oil policy. It may be also the case that the markets are now more sensitive to the U.S. oil market rather than to the events in the Persian Gulf. Stay tuned!

If you enjoyed the above analysis, we invite you to check out our other services. We focus on fundamental analysis in our monthly Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. If you’re not ready to subscribe yet and are not on our mailing list yet, we urge you to join our gold newsletter today. It’s free and if you don’t like it, you can easily unsubscribe.

Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.

Thank you.

Arkadiusz Sieron, Ph.D.
Sunshine Profits‘ Gold News Monitor and Market Overview Editor

Gold News Monitor
Gold Trading Alerts
Gold Market Overview

Did you enjoy the article? Share it with the others!

Jan Market Overview

Gold Market Overview

Our summary is not merely backward-looking. On the contrary, the analysis should help investors better understand the precious metals market and draw appropriate investment conclusions for the New Year.
We will also share our fundamental outlook for 2020, presenting our base scenario and its implications for the gold market. We will focus on the impact of the macroeconomic drivers, such as the interest rates, the Fed and the ECB monetary policies, the U.S. fiscal policy, etc. We argue that the fundamental outlook for gold has deteriorated since 2019.
Last but not least, we will analyze the potential upside and downside risks for the gold market in 2020. In particular, we will examine whether investors should expect recession this year.

Read more in the latest Market Overview report.

menu subelement hover background