Safe-Haven Buying and Upcoming FOMC Meeting Dominate Market Sentiment

According to the Associated Press, on Saturday the Iranian-backed Houthi rebels launched a drone attack against the world’s largest oil processing facility and a major oilfield in Saudi Arabia.

“The attacks were the latest of many drone assaults on the kingdom’s oil infrastructure assaults in recent weeks, but easily the most damaging. They raise concerns about the global oil supply and likely will further increase tensions across the Persian Gulf amid an escalating crisis between the U.S. and Iran over its unraveling nuclear deal with world power.”

According to MarketWatch, “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.”

Locked and Loaded

President Trump announced in a tweet that we are ‘locked and loaded’ depending on verification, but are waiting to hear from the kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!

The attack knocked out 5.7 million barrels of daily production, which represents 5% of global production. The repercussions were felt across the financial markets. The attack resulted in a flight to safe haven assets such as gold and silver, lower global equities and caused light crude oil futures to rise 12.65%. Currently the October contract is fixed at $61.83 per barrel.

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

Federal Reserve Members set to Meet Tomorrow

Members of the Federal Reserve will begin this month’s FOMC meeting on Tuesday and conclude the following day on Wednesday. This policy meeting is expected to announce an interest rate cut of ¼%. While an interest rate cut is widely expected and as such is currently priced into financial markets, market participants will focus on the statements as well as any comments by Chairman Powell at the conclusion of this month’s meeting to ascertain how many rate cuts the Fed will initiate this year and  during the first quarter of 2020.

The events that have transpired over the weekend coupled with the FOMC meeting could be highly supportive of safe haven assets such as gold and silver. According to analysts collectively these events could take gold to $1550, especially if statements by Chairman Powell are interpreted as dovish.

Wishing you as always, good trading,