As the potential for a trade war between the world’s two largest economies – China and the U.S. – have started to abate, a new conflict has started worrying markets. The West has been considering the potential of sanctioning Russian owned companies and assets as a reaction to both the Skripal poisoning and escalating tensions in Syria. The second event was kicked off by the alleged use of chemical weapons against civilians in Douma – one of the last rebel held territories closest to Syria’s capital of Damascus. The chemical attack was reported to be enacted by the Russian-backed Assad forces.
This caused a spike in the prices of both Oil and certain industrial Metals – the leader amongst them: Aluminum and Nickel as rumors circulate about sanctions being taken against UC Rusal – a Russian owned company with operations in the U.S.
Oil’s rally was likely fueled (I apologize for the unavoidable pun) by conflict in the Middle-East along with Tuesday’s API report showing a significant drop in oil reserves in the region of 1.1 million barrels. Oil’s price reached a 3 ½ year high. WTI was at $69.09 and Brent at $74.33 at the time of writing this article.
The volatility index (VIX) is showing a downwards trend, and the drop in a price of gold and silver seems to reflect this; gold was banded between 1350.68 and 1344.88 and silver between 17.2051 and 17.1318 (at the time of writing) – even as aluminum and nickel surge.
These conditions are the bread and butter of trend traders, as both highs are formng (with Oil and Metals) and lows (with Precious Metals).
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