In the coming months, the situation in the Near East will continue to be turbulent, but this condition will provide insignificant support to gold prices. Because in December, market participants expect the US Fed to tighten interest rate policy.

On November 24, Turkey, which belongs to NATO, brought down a Russian Su-24 plane on the border of Turkey and Syria (The Russian Federation asserts that this took place within Syria). Turkey explains its actions as defending its territory. The US has already expressed support for Turkey. World financial markets reacted following a harsh statement by V. Putin regarding Turkey's actions (a stab in the back). Investors began to sell off risky assets (shares) and buy defensive assets (yen, gold, US bonds, etc.).

But on November 25, market sentiment changed. That day European share indices DAX30 and CAC40 rose by more than 1%, while, after testing a support level of 1080 USD, gold prices corrected downward, rushing toward a support level of 1064 USD.

The same day Sergey Lavrov, head of the Russian Ministry of Foreign Affairs, stated that the Russian Federation has no plans to wage war against Turkey. Turkish Prime Minister Akhmet Davutoglu in turn said that Ankara considers the Russian Federation to be a friend and does not want relations to rupture following the incident with the downed Russian Su-24.

In the coming weeks we can expect strained relations between Turkey and the Russian Federation, but a direct conflict with Turkey, let alone all of NATO, is not likely. First, the Russian Federation is a nuclear power. Second, France, which is a member of NATO, is presently strengthening relations with the Russian Federation to combat terrorism. Third, the existing volume of trade between Turkey and the Russian Federation is very large (18.0724 billion USD for the first 9 months of this year).

In the coming months the situation in the Near East will continue to be turbulent, but this condition will provide insignificant support to gold prices. In December market participants expect the US Fed to tighten interest rate policy. The likelihood of more active measures from the US regulator increased after the growth rate for US GDP in Q3 2015 was revised from 1.5% to 2.1%. Breaking through 1064 USD will trigger defensive orders to sell and will open the door for gold prices to reach 1040 USD.

 

GOLD, H1

Gold