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June 19, 2024
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Precious Metals

Gold prices rally as U.S. airstrikes against Houthis rekindle safe-haven bid

Gold and oil prices rose overnight after the United States and the United Kingdom launched a series of airstrikes against Houthi rebels in Yemen in response to the recent attacks on commercial shipping vessels in the Red Sea, and gold continued to make gains during Friday’s trading session.

The escalation has had a dramatic impact on energy markets, as the region produces approximately one-third of the world’s oil, and around 10% of global oil shipments pass within missile and drone range of the Iran-backed Houthi rebels.

Brent crude oil futures rose as high as $80.72 per barrel just before 7 am EST, and are currently trading just below $80, while WTI crude topped out at $75.20 per barrel and now trades just below $74 at the time of writing. At their highs, both contracts were up over 3% on the session.

Gold has also seen a renewed safe-haven bid as the airstrikes have reignited fears that the Israel-Hamas conflict that began in October could escalate into a wider war in the region. 

Spot gold was trading below $2,030 per ounce on Thursday before news of the airstrikes broke, and it has been on a steady climb higher ever since, hitting a daily high of $2,062.31 shortly after 9:30 am EST. And while oil prices have pulled back somewhat, spot gold is holding near the upper levels of the daily range, last trading at $2,057.72, up 1.41% on the session.

U.S. President Joe Biden announced that the airstrikes had targeted a number of rebel emplacements, and he left open the possibility of additional actions against the Houthis. 

“These targeted strikes are a clear message that the United States and our partners will not tolerate attacks on our personnel or allow hostile actors to imperil freedom of navigation,” Biden said. “I will not hesitate to direct further measures to protect our people and the free flow of international commerce as necessary.”

A spokesperson for the Houthis said that all U.S. and UK interests are now legitimate targets.

The Houthis have launched missile and drone attacks at commercial and even military ships on a near-daily basis since the Oct. 7 attacks by Hamas against Israel, but after Iran seized a tanker with Iraqi crude destined for Turkey on Thursday morning, the United States and its allies decided to respond.

Iran said the seizure was in response to the confiscation of the same vessel and its oil by the United States last year. At the time, Iran warned the U.S. that the move would “not go unanswered.”

“After the theft of Iranian oil by the United States last year, St Nikolas tanker was seized by Iran’s Navy this morning with a judicial order … it is en route to Iranian ports,” the Iranian Fars news agency reported, citing a statement by the Navy.

The ship was carrying 145,000 metric tonnes of oil from the Iraqi port of Basra to Aliaga in western Turkey via the Suez Canal. The vessel was manned by a crew of 19, which included 18 Filipino nationals and one Greek national, according to the operator.

John Weyer, Director of the Commercial Hedge Division at Walsh Trading, told Kitco News on Thursday that it would take a material disruption of supply to change the fundamental situation in the oil markets.

Weyer said that $76 is the near-term resistance for WTI crude, but even if bulls make a push and get above $77, those levels haven’t been sustained recently. 

“The one thing a lot of people who’ve been following oil for years are having a hard time with is the supply numbers,” he said. “The U. S. domestically is producing more than ever, and even with all that’s going on, recent events with the Middle East and Ukraine, supply routes remain open. We haven’t had an interruption of supply of any significance.”

“You could see WTI dragged up a bit, but I think you’re going to have to have some serious interruptions to go from $80 to $100 or above $90.”

Trader and analyst TraderStef posted the following chart on X, which shows the impact of the recent escalation in gold prices.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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