Precious Metals Edge Up On Increasing Tensions Over Multiple Geo-Political Issues

Gold prices inched up early Tuesday as Asian stocks faltered, weighed down by political tensions between Saudi Arabia and Western powers, uncertainties around Brexit and Italy’s budgetary woes. Geopolitical tensions are escalating and that has brought some safe-haven buying back into the gold market.

Russia’s latest statement could also be considered as the reason for the hike in gold price action as Russia said it would be forced to respond in kind to restore the military balance with the United States if Trump carried through on a threat to quit a nuclear arms treaty and began developing new missiles.

Spot gold XAUUSD is trading at $1231.80 an ounce up by 0.79% on the day, while US gold futures GCcv1 is trading at $1235.40 an ounce up 0.88% on the day. Gold is used as an alternative investment during times of political and financial uncertainty but increases in the value of USD in long-term could affect price action in gold in a negative manner in long term.

US Crude Price Turns Dovish As Saudi Announced Possible Partnership With Russia

While USD has been hogging a lot of limelight in name of safe haven instrument recently, the risk of market sentiment currently prevalent in the market has resulted in traditional safe-haven assets seeing positive price action as precious metals come in second place among common safe haven instruments preferred by investors aside from US Greenback.

The dollar gained against its major peers on Tuesday, reining as the preferred safe haven currency amid an increase in risk off-market sentiment owing to multiple geopolitical issues such as US-Saudi crisis escalation, Italian budget crisis, Russia’s threat to retaliate in case of US government breaking the deal on manufacturing nuclear weapons and Brexit woes. The dollar index DXY, a gauge of its value versus six major peers, traded flat at 96.04 across morning trading session for the day and is expected to continue moving above $96 handle for a sustained breach to detach above its 200-week moving average of 95.792 on a multi-session basis.

Meanwhile, Spot Silver XAGUSD is currently trading at $14.68 an ounce up by 0.85% on the day. Oil prices dipped on Tuesday after Saudi Arabia pledged to play a “responsible role” in energy markets, although sentiment remained nervous in the run-up to U.S. sanctions against Iran’s crude exports that start next month.

There has been some concern that just as markets tighten with the start of the U.S. sanctions against Iran, Saudi Arabia could cut crude supply in retaliation for potential sanctions against it over the Khashoggi killing. Trying to dismiss such worries, Saudi Energy Minister Khalid al-Falih said on Monday that “there is no intention” for such action, and that Saudi Arabia would play a “constructive and responsible role” in world energy markets.

Spot Crude WTIUSD is currently trading at $68.92/b down by 0.73% on the day as Saudi has announced a possible partnership with Russia. This could prove detrimental to the US as both Russia & Saudi Arabia have the power to affect crude oil price dynamics in the global market.