Oil and gold prices decline as concerns ease over Mideast worst-case scenarios

Dollar is little changed, while gold stays around $2,000

By Ahmed Azzam | @3zzamous | 30 October 2023

  • Oil prices drop as Mideast tensions ease.

  • Bonds follow suit with reduced safe-haven demand.

  • Gold prices dip but remain near $2,000 per ounce.

  • VIX fear index climbs above 21; central bank meetings ahead.

Oil, gold, and government bonds experienced a subtle retreat as the demand for safe-haven assets waned, following a less progression of geopolitical in the middle east on the ground.

Brent crude, having surged by nearly 3% on the preceding Friday, slipped beneath the $89 per barrel threshold, while WTI began its descent towards $84. Concurrently, S&P 500 futures contracts exhibited a modest 0.3% uptick, attempting to recover from a 0.5% dip on the previous trading day. The market's risk appetite had been hampered by concerns, including the consistently hawkish stance of the Federal Reserve and underwhelming corporate earnings. Meanwhile, European futures remained relatively stable.

The US dollar displayed minimal fluctuations in its value against major currency counterparts, while the yield on 10-year Treasury notes saw an increase of approximately four basis points. The price of gold receded slightly but retained its ground at around $2,000 per ounce, and Australian bond yields experienced a marginal upward shift.

At this juncture, the financial markets find themselves in a precarious position, teetering between tightening financial conditions and geopolitical-driven risk aversion. Presently, it is the volatility in interest rates that is fueling the exodus from emerging market assets and equities in developed markets.

The VIX index, often referred to as Wall Street's "fear gauge," has ascended beyond 21, a notable uptick from its levels around 13 in mid-September. It remains below the mid-20s peaks witnessed in March, when the market turmoil was instigated by the collapse of several regional banks.

This week promises a plethora of potentially market-altering events, including pivotal central bank meetings in Japan, the United States, and the United Kingdom. These events are poised to shape the trajectory of global financial markets as investors anxiously await the decisions and guidance from these influential monetary authorities.