This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Gold Will Plummet if U.S. Strikes Syria

NEW YORK ( TheStreet) -- Don't buy gold if Western powers militarily intervene in Syria.

Many investors view the yellow metal as an asset hedge against crises, but it's important to interpret Syria as a much more dynamic situation.

"The risk premium for Syria is already built into the price currently, and there would normally be a flight to dollars should conflict arise," said Graham Leighton, a trader at Marex Spectron.

Gold's 2% rise on Tuesday afternoon resulted from traders pricing in the likelihood that the United States and other Western powers would act in Syria, following Secretary of State John Kerry's comments.

At COMEX gold's current price of $1,397.80, the precious metal has fallen 1.6% since Tuesday. This doesn't mean gold is entering a correction period during which it will fall an additional 7% -- an elimination of the total gains in August -- but it does suggest that traders felt the asset may have been overbought.

In interviews with traders since gold's bounce on Tuesday, most mentioned three different scenarios with two likely outcomes for the gold market.

The first is if the West engages in a limited airstrike on Syria; the second is if there isn't any action taken; and lastly is if the airstrike turns into a broader operation with troops in the country.

If the United States or another Western country launches a limited airstrike -- one that lasts a few days or less -- traders said it's probably best to sell gold positions whether they're in gold exchange-traded funds, gold mining stocks or futures.

"The likelihood is that when we see those missiles fly some of the uninformed [investors] will come rushing in and they'll be late to the party," Jon Najarian, senior economic advisor at Capital Gold Group, said in an interview. "They'll pull the chairs away, [and] when the music stops those guys won't have a place to sit."

A limited airstrike is what the market initially expected when it popped on Tuesday, and a fulfillment of those expectations would trigger profit-taking among traders as they would see little else to fuel the gains that had been based on a short-term military intervention.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
IAU $12.48 2.04%
GLD $123.65 1.95%
ABX $19.37 10.37%
GG $20.15 6.39%
NEM $34.97 6.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs