Escalation in the Middle East, and ongoing economic woes in China are continuing to lend support to precious metals today. Gold and silver have both seen a mild price jump as markets opened this week, as traders weigh up the latest news around the world.
Gold briefly jumped above $2,030/ €1,875 this morning, with silver pushing back above $23/€21. While the gains have been comparatively small, they have reversed gold’s losses from last week, and continued the rising trend for silver. A stronger dollar on more hawkish rate predictions had seen the metals fall, but the ongoing geopolitical and economic concerns continue to support both metals.
News emerged over the weekend that an attack in Jordan resulted in the death of three US soldiers. While Iran has denied any involvement, the Iranian-backed Islamic Resistance group have claimed responsibility for the attack. The death of US troops could be a significant escalation in the conflict, and the US have stated they will respond, though what form this will take is unclear.
The conflict in the Middle East has slowly been spreading further from Israel and Gaza, affecting many countries across the region. The US and UK have already become involved in response to attacks on shipping in the Red Sea, but if the US become more active in the region there will be wide-spread implications that will likely see further safe haven support for gold and silver.
Markets are also concerned over the state of the Chinese economy. Chinese stocks have seen heavy selling in recent years. The Hang Seng Index has lost a worrying 47% since February 2021 as China’s economy struggles to maintain the high growth of previous years. The China Securities Regulatory Commission have brought in new rules to limit short selling in the hopes of slowing the stock market collapse.
Beleaguered property developer Evergrande also suffered another blow after a Hong Kong court ruled the company should be liquidated. The Hong Kong arm of the developer is separate to its mainland Chinese arm, but the ruling could still spell doom for the behemoth company, and the liquidation could be enforced in China as well. With more than $300bn of debt and potentially millions of incomplete developments, the liquidation of Evergrande could have a profound impact on the Chinese economy.
Volatility continues to play a major part for gold and silver at the moment, and uncertainty is high. Either of the above could quite easily push gold and silver higher, and combined could see gold climb to new records. Markets are becoming desensitised to all the chaos of the past four years however and seem to be more cautious when reacting to news like this. With this morning’s gains proving limited however this could be a good opportunity to buy before prices rise further.