Geopolitical uncertainty stalks markets after Spain terror attacks
Gold on track for second consecutive weekly gain amid political uncertainty in the US
LONDON: An aversion to risk was evident in financial markets Friday after a string of terror attacks in Spain.
Stock markets around the world were under pressure while traditional safe haven assets, such as gold, were in demand.
In Europe, the FTSE 100 index of leading British shares and France’s CAC 40 were both down by almost 1 percent at 1 p.m. GMT.
The source of the risk aversion gripping markets, particularly in Europe, was the attacks in Spain. In the early hours of Friday morning, police shot and killed five people wearing fake bomb belts who staged a deadly car attack in Cambrils, a seaside resort in Spain’s Catalonia region, just hours after a van plowed into pedestrians on a busy Barcelona promenade.
Spanish authorities said the back-toback vehicle attacks — as well as an explosion earlier this week in a house elsewhere in Catalonia — were related and the work of a large terrorist group. At least 14 people were killed in the attacks.
More uncertainty over developments in the White House also added to investor pessimism. President Donald Trump abandoned his plans to form an infrastructure advisory council, a day after the administration said it would close down two other advisory councils made up primarily of business leaders. The White House was also forced to issue a statement dispelling swirling rumors that Gary Cohn, head of the National Economic Council, was stepping down, saying they were “100 percent false.”
“We’re seeing risk aversion in the markets again on Friday, with the possibility of a self-inflicted crisis within Donald Trump’s White House and another terror attack, this time in Barcelona, weighing on risk appetite,” said Craig Erlam, senior market analyst at OANDA.
Risk aversion traditionally sees supposedly risky assets such as stocks come under pressure, while supposed safe havens, such as gold and the Swiss franc, garner support.
Gold was on track for a second consecutive weekly gain amid the political uncertainty in the US and Spain terror attacks.
“There is clearly more for financial markets to be concerned about,” Danske Bank analyst Jens Pedersen. “That has led to a risk-off environment, and that’s supportive for gold.”
Spot gold was up 0.6 percent at $1,295.27 an ounce by 11.30 a.m. GMT, on course to extend last week’s gain of 2.5 percent. US gold futures for December delivery were up 0.7 percent at $1,301. Investors ditched riskier assets while the dollar eased, further supporting gold.
“The discord coming out of Washington could prove supportive for gold as well, as this could pressure the dollar further, just as the Fed is casting fresh doubts about its (interest) rate timetable,” said INTL FCStone analyst Edward Meir.
Policymakers in Europe and the US expressed concerns about unwinding monetary stimulus too soon. Gold is sensitive to rising interest rates because they push up bond yields, increasing the opportunity cost of holding nonyielding bullion while tending to strengthen the dollar, in which gold is priced.
Spot gold faces resistance at $1,291 an ounce and could hover below this level or retrace toward support at $1,271 again, said Reuters technical analyst Wang Tao.
Among other precious metals, silver climbed 1 percent to $17.17 an ounce, having touched a two-month high of $17.25. Platinum was up 1.2 percent at $974.80, on track for a third straight week of gains.