The gold price saw a rapid safe haven response on Tuesday morning following the news that a Russian warplane was shot down by Turkish jets near the Turkey-Syria border. (Turkey says it warned the Russian plane many times to leave its airspace before firing; Russia claims the plane never crossed the border into Turkey.)
NATO will be holding an emergency meeting in Brussels, Belgium later today to discuss the Russia-Turkey controversy. At the same time, French President Francois Hollande will be hosted in Washington, D.C. by President Obama for talks regarding the joint anti-terrorism effort against Daesh.
Gold jumped more than $8 per ounce around 8 am ET this morning, advancing to $1,078/oz. Meantime, global stocks were sharply lower, already losing from 0.67% to 2% across Europe.
Although the Cold War is far more than a distant memory for many Americans, it has been more than 60 years since a NATO member country downed a Russian jet. (Turkey is a NATO member.)
Over the last several years, however, Russia has become increasingly aggressive about encroaching upon the borders of its western neighbors. The Scandinavian countries have had to warn Russian vessels to stay out of their waters and airspace in recent years. Sometimes these would be explicit war simulations or apparent military intelligence reconnaissance. These incidents had a similar narrative: Russian pilots would ignore repeated warnings to divert their path, seeming to push the limits and gauge the reaction of the other country. This time, Turkey didn’t hesitate.
We can expect some bellicose rhetoric from Russian premier Vladimir Putin, but chances are good that neither Turkey nor Russia wants to escalate the conflict. NATO would be obligated to come to Turkey’s defense, and a confrontation of that scale is unattractive to both sides. This does show that all the confusing overlapping tensions in Iraq-Syria are coming to a head, however.
Although there were some acute responses in the markets, like the Turkish lira plunging and global equities falling, the overall impact seems to be subdued. It appears that gold has absorbed all of the safe haven demand (save some new development) at $1,078/oz. Markets in the U.S. will probably see less of an overall effect from the incident in Turkey, especially if domestic economic data released today continues to be seen as positive. GDP numbers for the third quarter were revised upward to 2.1% from an original 1.5% estimate. The S&P/Case-Shiller home price index will also be released today, along with consumer confidence numbers. (Interestingly, after 0.3% growth in Q3, Germany’s business confidence index was a robust 9% above neutral.)
We can expect fairly light volumes and sparse activity in U.S. markets today and the rest of the week, however, as trading winds down in anticipation of the Thanksgiving holiday on Thursday.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.