Oil & Gold Prices Rally On Geopolitical Turmoil

November 24, 2015

New York (Nov 24)  Turmoil on the Syria border is prompting knee-jerk gains for beaten down commodities oil and gold.

The SPDR Gold Shares (GLD) added 0.6% in recent trading, while the United States Oil Fund (USO) rose 2.7% to $13.37. Gold prices moved higher from multi-year lows, while oil rebounded from a three-month low.

Tuesday’s geopolitical developments to snap gold and oil from their recent slides. Turkish fighter jets shot down a Russian warplane on the Turkey-Syria border early on Tuesday. Leaders from both countries pointed fingers. Russian President Vladimir Putin called the action a “stab in the back.” Particularly worrisome is the fact that Turkey is a member of the North Atlantic Treaty Organization, a military alliance formed to counter the influence of the Soviet Union during the cold war. NATO officials convened an ad hoc meeting; here are updates.

Gold tends to be a haven in times of duress, so Tuesday’s advance should come as no surprise. What about oil? Syria isn’t a major oil producer. Dan Wantrobski, technical analysis guru at Janney, says that short-term oil gains could be in the offing. Oil’s strength on Tuesday relative to the U.S. stock market “implies to us that oil is setting up to outperform the benchmark S&P 500 on a relative basis over the short-run- in order to reduce these oversold pressures and continue to base on the nominal price charts.” He explains:

“While commodities in general (energy included) remain in a structural bear market longer-term, we do expect counter-trend rallies and cyclical uptrends to develop from time to time within this broader cycle.

We believe crude prices can target the $45-46 range over the short-run for initial resistance- if the commodity stages a closing break above that threshold (30-day moving average), then will believe the commodity should go on to target the low-$50s range once again.”

That translates into $14 for the USO, followed by the $15.50 to $16 range:

“Going forward, continue to watch the $40 zone on WTI for support (significant, in our opinion)- which equates to the high-$12-13 range for the USO.”

Meanwhile, the iShares MSCI Turkey exchange-traded fund (TUR) plunged 4.6% on volume that’s already nearly double the average over the past 30 days. The Market Vectors Russia ETF (RSX) dropped 1.4%.


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