4. Politics in the U.S. and Eurozone
Just as economic reports can have an effect on markets, political actions and statements can move markets. Gero gave the example of Group of Seven (G7) and Group of 20 (G20) meetings as having the potential to move markets, especially because currency exchange rates have become an important topic at those meetings. Although he says nothing of significance has come out of those meetings lately, the potential to impact markets remains.
In addition to scheduled political events like the G7 and G20 meetings, Gero also says it is important to keep your ear to the ground for any unexpected political events, such as last year’s Arab Spring or the sovereign debt crisis that continues to wrack Europe.
To keep track of these sorts of events, Gero says he constantly is scanning headlines for any news that may affect the metals markets, and when he sees something of note is when he digs deeper into the story. “Cyprus was a headline; Greece was more than a headline; the fiscal cliff was a headline,” he says.
5. Politics and threats in the Middle East
The Middle East continues to be a geopolitical hot spot. Because of the region’s abundance of oil, traders need to pay attention to what is happening in that part of the world. Gero says metals traders also need to consider the price of oil in their analysis because it can be a bellwether of the perceived strength or weakness in the economy, or a gauge of the possibility of war breaking out in the Middle East.
All of these factors are important because they can affect gold’s perceived need as a safe haven. “If you have political turmoil or they are blowing up pipelines for example, that could have an effect on gold because it’s going to have an effect on crude oil,” he says. “It’s a matter of safe haven demand for gold.”