Gold Up, Silver Down Amid US-Iran Conflict

 

Gold Up, Silver Down as US Forces Attack Iran

(Bullion News Network) – Despite an eventful weekend of news, gold and silver prices did not open the week with a major price spike. The spot price of gold spiked over the weekend, crossing $5,400 per troy ounce after the United States conducted military strikes that killed Iranian Supreme Leader Ali Khamenei. Gold prices soared to an all-time high over the weekend amid concerns that the conflict may turn into a larger regional war and impact the price of oil. The precious metal still jumped to open the week but pared its previous gains, closing Monday evening over $46/ozt higher. The spot price of silver pulled back to start the trading week, shedding $4.25 per troy ounce. The price action favored gold, driving the gold-silver ratio more than 7% higher compared to Friday’s closing price.

Over the weekend, United States President Donald Trump announced that the U.S. military conducted a series of strikes against Iran after diplomatic relations between the two countries broke down. The strikes killed Iranian Supreme Leader Ali Khamenei, leaving Iran’s leadership uncertain as American and Israeli strikes continue. U.S. officials have assured reporters that they do not project that the conflict will become a “forever” war, but President Trump said during a national address that combat is expected to continue for several more weeks and may involve more American casualties. Six U.S. soldiers have been killed since the fighting began, as of Monday evening.

Oil futures spiked shortly after the strikes began, jumping more than 6.3% in the past five days. U.S. crude oil prices also surged, jumping by more than $6 per barrel, according to some sources. Wall Street dipped to begin the day but recovered, closing largely flat as traders bought the dip at midday. Oil prices retreated slightly as the Monday trading session continued, easing at least some of investors’ concerns that the conflict in Iran could have a more pronounced impact on markets.

The busy week of news will be bookended by a fresh U.S. employment report, which is scheduled for release on Friday. Forecasters expect job growth to slow down after January’s surprise, pulling back to 50,000 new payrolls compared to 130,000 the month prior. The U.S. unemployment rate is also expected to fall, with the median forecaster projecting a decrease from 4.4% to 4.3%. This employment report could be particularly important to the Federal Reserve’s Federal Open Market Commission (FOMC), which will meet again in March and is largely expected to leave interest rates unchanged for a third session. CME FedWatch projects the probability that the Fed will vote to cut interest rates at just 2.5%, down from 5.5% last week and 10.4% one month ago. Surprises in this February labor market report could influence the odds of a rate cut when the Fed meets again later this month.

It is currently unclear how the conflict in Iran will play out and how continued U.S. strikes may impact oil and gas prices. Safe haven assets like gold tend to perform well during wartime, since prolonged conflict can be inflationary. The war with Iran might have an outsized effect on oil and gas prices, which tend to correlate strongly with the spot price of gold. Although this is not always the case, some analysts expect a further flight to safe haven assets as the conflict continues, which can impact the available supply and price of gold.

This week, traders are expected to be paying close attention to Iran as the American and Israeli strikes continue. Oil futures are also slated to be a major focal point as international markets attempt to predict how the conflict in Iran will impact access to crucial crude oil transported throughout the region. Gold erased much of its earlier gains as Monday continued, closing approximately $46 higher per troy ounce. Silver retreated, losing $4.25/ozt and driving the gold-silver ratio higher.