Gold Spikes Higher on Syria Worries

December Gold finished sharply higher on Tuesday and investors took protection against the possibility of military action against Syria by the U.S. Russia has already warned the U.S. about interfering in the country’s affairs, further escalating tensions.

The metal is surging after investors decided to dump equities and seek hedging protection in gold and lower-yielding assets. The move easily took out the psychological $1400 level that gave the market problems on Monday. Today’s rally has given the market enough upside momentum to bring an upside target of $1495.00 into the picture.

The nearest support is a Fibonacci level at $1372.88. Barring a closing price reversal top today or a settlement of the crisis in Syria, the market looks as if it is beginning a solid breakout rally.

October crude oil also posted a solid close on Tuesday. Speculators are pricing in a possible disruption in supply but so far the buying has been limited because of the resistance at $107.95. A sustained move through this level could easily send prices to $110.00.

Despite recent reports of a weakening U.S. economy, the EUR/USD finished flat on Tuesday. Earlier in the session, it was reported the German Ifo business survey beat estimates. This should’ve sent prices higher, but investors were too busy paying attention to the action involving Syria and the U.S. to post a reasonable reaction.

Overnight, investors decided to dump higher-yielding, so-called riskier assets in favor of the Dollar and Yen. This made the Euro a casualty against these two currencies.  The main trend is still up on the daily chart, but today’s action suggests a shift in the fundamentals could drive this market through a key retracement zone at 1.3328 to 1.3299.

The GBP/USD continued to fall for the fifth consecutive day. Not only is the market weakening because of greater demand for the dollar, traders are worried Bank of England Governor Carney is going to reiterate his position of lower interest rates over the long run in a speech he is scheduled to deliver on Wednesday.

The current chart action suggests the Sterling is gathering enough momentum to test the recent bottom at 1.5422 over the near-term.

It looks as if the markets are pricing in the possibility of military action by the U.S. against Syria. The situation could escalate if Russia gets involved. The current action suggests investors are currently discounting minimum military action, but if the situation worsens then look for gold and crude oil to spike to the upside.