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What Did Tomahawk Missiles Just Do for Gold?


Apr. 11 2017, Updated 8:25 a.m. ET

Attack on Syria

After US President Donald Trump ordered the launch of nearly 60 Tomahawk cruise missiles on a Syrian air base, precious metals experienced a lift off. Notably, the attack had not been officially approved by Congress and was condemned as an act of aggression against a sovereign state by the Russian President Vladimir Putin.

These events further raised concerns over the conflict between the US and Russia. The act came in the wake of a chemical gas attack in Syria’s Idlib province earlier the same week.

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Five-month high for gold

Precious metals, as we know, are famous for their safe-haven appeal, often surging with uncertainty in markets. Gold futures for May expiration climbed to $1,271.2 per ounce and ended the day at $1,255.6 per ounce on Friday, April 7, touching its five-month high price due to the sudden unrest.

Meanwhile, silver futures for July expiration was 0.5% lower than the previous trading day, ending April 7 at $18.2 per ounce. Platinum and palladium, comparatively, traded flat, despite the increased haven bids.

Call-implied volatility

Gold’s call-implied volatility rose to 11.6% on Friday, April 7, whereas the call-implied volatility for silver dropped from the previous trading session to 17.5%. (Call-implied volatility is a measure of the changes in the price of an asset, with respect to the variations in the price of its call option.)

To be sure, overall market volatility has been lower, as you can see in the above chart. There are chances that a rise in volatility could also spike the price of precious metals like gold.

The mining funds that rose on Friday include the Global X Silver Miners Fund (SIL) and the SPDR S&P Metals and Mining ETF (XME). The miners that also rose include Primero Mining (PPP), Gold Fields (GFI), Aurico Gold (AUQ), and New Gold (NGD).

Below, in the next five parts of this series, we’ll discuss the various aspects of gold’s reactions to recent US and global events, starting with the latest economic numbers.


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