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Gold settles at a more than a 1-week high as historic oil outage rattles investor nerves

Gold futures finished solidly higher on Monday, at their highest price in just over a week, after an attack on Saudi Arabian oil production sent oil values skyrocketing and investors turning to haven assets, including bonds and precious metals.

“The safe haven demand we are seeing today is real, especially with the escalation of the proxy war between Saudi Arabia and Iran,” Jeff Wright, executive vice president of GoldMining Inc., told MarketWatch.

‘Gold and the U.S. dollar see immediate gains when possibility of Middle East conflict rises. Safe haven interest will not wane quickly.’

Jeff Wright, GoldMining Inc.

“Gold and the U.S. dollar see immediate gains when the possibility of Middle East conflict rises,” he said. “Safe haven interest will not wane quickly.”

However, attention will divert to the Federal Open Market Committee’s two-day policy meeting which begins on Tuesday, he said, adding that he expects to see a 25 basis point interest-rate cut, with the market’s focus on the Fed statement following the decision.

“Gold could get back to $1,550 with a dovish statement. Stability is right below $1,500 given safehaven demand this week,” said Wright.

December gold GCZ19, -0.37%  on Comex gained $12, or 0.8%, to settle at $1,511.50 an ounce, after registering on Friday a weekly decline of 1.1%. The settlement was the highest for a most-active contract since Sept. 6, FactSet data show.

Silver for December delivery SIZ19, -0.64% added 45.7 cents, or 2.6%, to settle at $18.026 an ounce, following a weekly loss of 3%, according to FactSet data.

The gain for oil comes after Saudi oil production facilities on Saturday were hit by an attack according to Saudi Arabian officials, which knocked out 5.7 million barrels of daily production, representing some 5% of global production. The event, described by commodity experts as the largest-ever single-disruption to crude output, has rattled markets because spikes in oil prices can hobble global economies. The kingdom has been racing to restore roughly one-third of the disrupted production.

“Gold suffered a pullback last week but remains an attractive alternative given the uncertain geopolitical backdrop and the likelihood that sovereign debt expansion will be more widely implemented in conjunction with aggressive monetary policy,” wrote Bruce Bittles, chief investment strategist at Baird.


Other metals traded on Comex ended lower, with December copper HGZ19, -0.27%  down 2.2% at $2.6405 a pound. October platinum PLV19, -0.02%  shed 1.4% to $939.20 an ounce and December palladium PAZ19, +0.35%  finished at $1,592.20 an ounce, down 0.5%, after marking a record settlement on Thursday.

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