Gold rallies on Syria attack

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Representational image

Published Apr 7, 2017

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Johannesburg - Gold rallied to the highest in almost five

months, breaking through a key technical level, after the US launched a missile

strike against Bashar al-Assad’s regime in Syria after his government was said

to have used poison gas to kill civilians.

As part of a rush to haven assets such as oil and the

yen, gold climbed as much as 1.4 percent to $1 269.46 an ounce by 10:45 a.m. in

London, the highest since November 10. It broke through the 200-day moving

price average, indicating upwards momentum. The metal is heading for a fourth

consecutive weekly rise and has climbed 10 percent this year.

The decision to strike Syria marks a reversal for US

President Donald Trump, who during his campaign faulted past leaders for

getting embroiled in conflicts in the Middle East. Secretary Rex Tillerson told

reporters that “steps are under way” to mobilize a coalition to remove Assad, a

Russian ally. The American attack was condemned as an “act of aggression

against a sovereign state” by Russian President Vladimir Putin.

“There’s clearly an element of risk aversion in the

market, so you have buying of gold,” said Georgette Boele, a currency

strategist at ABN Amro Bank in Amsterdam. The metal has been close to the

200-day moving average for some time and “needed something like this to break

through. This could be the beginning of a new positive phase for gold.”

Read also:  Gold is inching higher again

Miners were boosted by the rise in gold with Randgold

Resources leading the UK’s benchmark FTSE 100 Index today with a 2 percent rise

by 10:16 a.m. in London. AngloGold Ashanti, the world’s third-largest miner of

the metal, climbed 2.4 percent to 168.37 rand a share in Johannesburg.

Melbourne-based Newcrest Mining closed up 2.8 percent in Sydney.

The US action - with the Shayrat Airfield struck by 59

Raytheon Company Tomahawk cruise missiles - followed the gas attack in Idlib

province earlier this week. Announcing the strike, Trump said: “There can be no

dispute that Syria used banned chemical weapons.” Syria has denied responsibility.

Haven role

Bullion acts as a haven during times of geopolitical

conflict. Prices have also risen this week amid signs of escalating tension on

the Korean peninsula, with North Korea conducting a ballistic missile test in

the run-up to a summit between Trump and Chinese President Xi Jinping.

Other precious metals also rallied in the wake of the

strike. Silver jumped as much as 1.2 percent to $18.479 an ounce, the highest

level since February 27. Platinum rose as much as 1 percent, while palladium

gained as much 0.5 percent.

“The situation in Syria continues to deteriorate, with

news of a US missile strike,” Jordan Eliseo, chief economist at Australian

Bullion, said in an email. “It’s no surprise for gold to catch an immediate

safe-haven bid.”

BLOOMBERG

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