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Post Syrian Attack: Only Certainty is Uncertainty

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The price of gold surged after the US launched more than 50 cruise missiles at an airbase in Syria. The military action was in response to a deadly chemical weapons attack the US blames on the Syrian government.

Trump’s decision to launch an attack directly at the Assad government in Syria marks a dramatic reversal in the president’s positions. Just weeks ago Secretary of State Rex Tillerson said the “status of President Assad will be decided by the Syrian people.” As The Journal put it, this tacitly aligned the US with Russia’s plan to allow the Syrian leader to seek re-election.

Gold rose over 1% early Friday, edging close to a 5-month high. According to CNBC, spot gold rose 1.3% to $1,267.43 per ounce by 0225 GMT, after touching a high of $1,269.28. That marks the highest price since Nov. 10. Gold is on track for its fourth straight week of gains.

“Clearly this raises the stakes and we expect to see gold prices continuing to push higher in the short-term, at least until there is some clarity around whether this is a one-off or develops into something more,” ANZ analyst Daniel Hynes told CNBC.

Silver also got a boost, rising over 1% to $18.43 an ounce, after touching a more than one-month peak of $18.47.

The surge in the price of gold and silver comes as no surprise. Safe haven-buying is a typical response during times uncertainty and upheaval. Trump’s military action and talk of regime change in Syria could have much deeper ramifications that ripple beyond the region. Russia supports the Assad government and has already condemned the US attack. And of course, the Middle East isn’t the only unstable region in the world, as Bloomberg points out.

“Bullion acts as a haven during times of geopolitical conflict. Prices have also risen this week amid signs of escalating tension on the Korean peninsula, with North Korea conducting a ballistic missile test in the run-up to a summit between Trump and Chinese President Xi Jinping.”

While the media gets caught up in the events of the day, and their immediate impact on markets, it’s important to step back and look at things from a longer-term perspective. Nobody can predict the flashpoints that will spike precious metal prices in the short-term. Two weeks ago, nobody imagined the Trump administration would lob cruise missiles at Syrian government targets. In fact, it appeared there might be progress and some movement toward some stability in the war-torn country.

Things can change at any moment. That’s always been true.

But recent events do point to an underlying reality. The current US administration has a propensity to make brash decisions and turn policy on a dime. Trump has shown little political discipline since taking office. His handling of the healthcare debacle has created doubts about the president’s ability to navigate the complex political world inside the Beltway. Making deals on Capitol Hill isn’t the same as making deals in a Trump Towers penthouse.

While we can’t predict what specific events will unfold in the coming months and years, one thing seems certain – uncertainty.

It’s not just the question marks surrounding the Trump administration. As we reported earlier this week, elections in Turkey have people in that country on edge – and buying gold. The future of the EU remains murky. North Korea continues to saber-rattle. And of course, we can’t forget the shaky US economy. The Federal Reserve has backed itself into a corner trying to figure out how to “normalize” monetary policy without popping one of the many asset bubbles it’s inflated over the last decade.

In times of uncertainty, gold is the safe place to go. We see evidence of this with virtually every unsettling news event. But seeking a safe haven after the fact doesn’t really make a whole lot of sense. You don’t go into the cellar after the tornado. You need to establish your safe-haven before calamity strikes. That’s some food for thought in these uncertain times.

 

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