Gold and Silver End of Week Review

The week ahead blends two powerful forces: moderating economic momentum and increasing geopolitical tension. While US and Eurozone data suggest steady but unspectacular growth, rising friction between the US and Iran is injecting a fresh risk premium into energy markets. Macro is softening but geopolitics may dominate price action.

Gold is set for a huge bullish opening gap in Asian trading on Monday, with a flight to safety rush likely to sponsor the upsurge after the US and Israel struck Iran with heavy bombings over the weekend. More geopolitical headlines surrounding the Middle East conflict and Oil price movement remain in focus. 

AUD/USD has opened with a 1% bearish opening gap, heading toward 0.7000 in a dramatic start to a new week. Risk-aversion remains at full steam after the US and Israel attacked Iran in a coordinated move over the weekend and Tehran retaliated to the attack with force. The higher-yielding Australian Dollar is heavily sold off in Asia.

Markets are likely to open the week with risk-off, with declines led by airlines, cyclicals and trade-exposed names, while energy, defense and “strategic” sectors may be relatively steadier.

A primer on how markets will open on Monday, and why geopolitical risk may not be easily absorbed by financial markets this time around. Geopolitics and events between Iran, the US and the wider Middle East will dominate financial markets on Monday. The situation has continued to escalate as we move through Sunday. 

We expect the February employment report to show that January’s robust pace of job growth overstated underlying momentum in the labor market. We look for nonfarm payrolls to rise 45K in February, moderating from its current three-month average pace of 73K (Figure 1).