It was a volatile trading day on Wall St yesterday as the US market reacted to the weekend’s geopolitical developments in the Middle East. All 3 major indexes saw a major sell off in the morning, dropping over 1.5% at intraday lows. However, the afternoon saw a recovery as investors jumped on the buy opportunities. At the end, the S&P500 closed up 0.04%, the Nasdaq closed up 0.4% and the Dow Jones edged down slightly 0.2%.
What to watch today:
- Looking ahead to today, the SPI futures are indicating that the ASX will waver, with a 0.2% drop at the open of trade.
- Although the bulk of reporting season is behind us, keep an eye on popular tech name Life360 (ASX:360), which is due to release its quarterly results this morning.
- The biggest story of the day remains in commodities, which are still volatile following the weekend’s news.
- Crude Oil prices remain heavily inflated due to fears of supply chain disruption. As of this morning, it is trading up 6.4% at just over US$71 per barrel. The major risk factor sending the price higher is threats to the Strait of Hormuz, the waterway bordered by Iran to the north through which about 20% of the world’s seaborne oil trade flows. If this is blockaded further, it would cause a significant undersupply, causing crude oil prices to skyrocket.
- Gold is also trading higher, trading up another 1% to US$5330 per ounce. This spike comes as gold remains a traditional safe haven for investors during periods of volatility. In contrast, silver, which usually follows a similar trend to gold, is trading down 4.7% at US$89 per ounce. The reason for the disparity is that unlike Gold, around 50% of silver’s value remains tethered to industrial usage and demand, which has wavered in the face of possible supply chain risks. This industrial demand is what pushed silver so high so quickly in comparison to gold over the last few months, but it is also the reason why it sees more volatility than gold.
- During this period of geopolitical uncertainty, the Gold price will continue to have significant tailwinds behind it, which creates a buying opportunity in the gold industry. One such stock that Bell Potter recommends with a speculative Buy rating is Santana Minerals (ASX:SMI), which they give a target price of $1.70 per share. The company completed the first tranche of a $130m institutional share placement, providing it with the funds raised to develop its flagship gold project in New Zealand.
