General Suleiman is gone. Middle East Nervous

Weekly Report - 06/01/2020

Tensions in the Middle East Escalate


With the removal of Qasem Soleimani chaos may ensue in the Middle East owing to the continued US-Iran conflict. Still, the markets, largely unaware of Middle East intrigues, but for their effect on the oil price and, when acute, gold, are visibly rattled. Gold is at a 5.5-year high, at press time, 1580, a level not seen since the first of April 2013. Oil too has seen a sharp jump.

Week that was

Following nearly an entire year of escalating provocations by the Islamic Republic in their reaction to the 2018 US repudiation of the JCPOA deal, the US has held its response. The US administration did not react to the attack on shipping carried out by the Iranians in the Gulfs of Oman and Persia or the Strait of Hormuz, missile attacks on Saudi oil facilities, Saudi pipelines, and US drones. Only when the dueling in Syria spilled over and attacks moved into Iraq has the game gone up a notch regionally, ending the last round on Friday before dawn in Iraq with the killing of General Suleiman, the leader of the Al Quds unit of the Revolutionary Guard, an equivalent position to the Head of the CIA, but having been in power for 30 years. The effects on the markets were immediate. Indices fell sharply and gold and oil spiked up.


Main Focus This Week

We will surely be monitoring the prices of these key commodity assets throughout this week. It has long been our stated strategy to be trend followers and as such almost never trade against the prevailing trend. That is, Gold and crude are moving up on the fears, over-hyped by the media, that the Suleiman killing is the front door to imminent warfare. Our research indicates that the price rises in gold and oil will correct and reverse, perhaps as early as the first half of this week. In any event, these are highly volatile markets and so to hedge the risk of adverse reactions to our positions we will keep our stops tight.


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