Global ETF Strategy: Geopolitics and Gold, Oil ETFs

Rising political tension, lower bond yields and USD on the verge of reversing should make the rest of 2019 very interesting for the gold market.
Group Research21 Jun 2019
  • Rising Middle East tensions to take oil and gold prices higher
  • Implications of currency war and monetary easing interesting for gold market in 2H19
  • Supply risks in oil are being underestimated in our view
  • Consider direct exposure to gold and oil ETFs, as well as gold miners and silver ETFs
Photo credit: AFP Photo

As the US-Iran tension escalates, opportunities have arisen for gold and oil trades, which are accessible through ETFs.

Gold prices have formed a wedge or pennant pattern that has been in place for several years. The positive aspect of this pattern is its trend of higher lows. Fundamentally, gold has been resilient, gaining strength from escalating geopolitical risks, central bank buying, and uncertainties, however gold demand from discretionary buying as jewellery and bar & coin remains weak. Whether the aforementioned catalysts are strong enough to take gold prices to a new higher trend line remains to be seen.

Oil prices have been volatile in the past one year as the tussle between supply and demand keeps prices in a wild range. With oil prices having fallen near to the year’s low recently due to a re-escalation in the US-China trade war, we think the upside risk is there with the rising tension in the Middle East.

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