US Open – US/Iran, Oil, Gold, Bitcoin

Investors Breath a Sigh of Relief

Europe is off to a bright start, building on yesterday’s sentiment swing on the back of the de-escalation in the middle east, and US stocks look set to do the same.

Source – Thomson Reuters Eikon

The conflict between the US and Iran appears to have ended as quickly and unexpectedly as it began. I’m sure many will be left confused by the events of the last week but at the time of writing, it seems clear that neither side currently wants an escalation of the conflict and exited at the first opportunity, while doing their best to save face.

Whatever the motives for the de-escalation, there’s clearly relief across the markets as haven positions are unwound and risk appetite bounces back.  It’s certainly been a bizarre start to the year and comes as a reminder that we live in very unusual and uncertain times and these kinds of shocks can and will, at times, come from nowhere.

I guess it’s back to talking about the other major issues that have dominated markets in recent months, including the trade deal between the US and China, which will be signed next week. China confirmed that Vice Premier Liu He will be in Washington to sign the agreement and mark the first major de-escalation in the trade war.

Oil settles back at early January levels

If you want a clear picture of how the events of the last week have impacted the markets, look no further than oil prices. Brent crude is back trading in the region it was this time last week but the volatility in the interim has been extreme.

After spiking more than 5% in the aftermath of the attack on the two US bases, Brent fell almost 10% and ended the day not far from those lows. While future flare ups are likely, the clear desire on both sides not to engage for now has come as a huge relief to the markets and with that, the premium in oil has disappeared. Let’s just hope cooler heads will remain.

Brent Daily Chart

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Gold’s time to shine has passed

Gold is the ultimate safe haven so it’s no wonder it’s been in the spotlight over the last week. Unfortunately for the yellow metal, it’s time to shine has quickly passed and with it has the chance to break the $1,600 barrier in any meaningful way, in the near-term at least.

Gold now finds herself back around $1,550, roughly where it was this time last week and having to rely on a softer greenback to strengthen the case for another push higher. This may come but not with the same intensity that a potential war in the middle east brings.

Gold Daily Chart

Bitcoin bucks trend as market pares safe haven moves

Bitcoin has also pared it’s gains in the aftermath of the de-escalation of the US conflict with Iran but, unlike other asset classes, it remains well above last week’s levels. That’s not the behaviour you associate with a safe haven. Many may feel emboldened after the recent rally but I would urge caution. This is still a highly speculative instrument and cannot be relied upon.

Bitcoin Daily Chart

Source – Thomson Reuters Eikon

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