Gold Dips, But U.S. Warship Was Just Attacked

The markets were waiting for CPI tomorrow, but a massive attack just happened targeting U.S. warships in the Red Sea. Last time a similar, but much smaller incident happened in December, Gold/AUD rocketed to 3220.

All eyes have been on the CPI print happening tomorrow (12:30 AM Friday, Melb/Sydney time). The fundamental news arena has been mostly quiet this week and gold has closed consistently lower.

On Wednesday, gold experienced a modest decline despite a weakening dollar and an increase in treasury yields.

Saxo Bank observed that gold tends to follow the fluctuations of the dollar, and in this instance, a decrease in exchange-traded fund (ETF) holdings to a four-year low exerted downward pressure on gold prices.

The rise in treasury yields, typically unfavourable for gold due to its lack of interest yield, contributed to the decline. The US two-year note exhibited a yield of 4.379%, marking an increase of 0.8 basis points. Similarly, the yield on the 10-year note rose by 2.0 basis points, reaching 4.035%.

Interrupting the anticipation for tomorrow’s CPI print, what is being called the largest ever missile attack on shipping in the Red Sea. U.S. Central Command confirmed that the attack involved 21 missiles and drones and appears to have been launched from Yemen. The weapons specifically used were:

• 18 attack drones
• 2 cruise missiles
• 1 ballistic missile

The attack, according to CENTCOM, was launched by the Iranian allied Houthis. The U.S. Secretary of State was quick to focus on Iran and accuse them of aiding the attacks. This is a powder-keg situation as this region is a hub for global merchant ships, and the parties involved could lead to a larger U.S. allied VS Iran allied conflict.

U.S. F-18 fighter jets teamed up with two destroyers, as well as one UK destroyer to shoot down the drones and anti-ship missiles.

HMS Diamond of the Royal Navy shot down 7 drones. Source: DefenceHQ

The Houthis have confirmed that their attack was targeting U.S. warships via a television statement. The Houthi general who spoke, Yahya Saree, said that the attack was targeting the U.S. warship for providing support to the Zionist entity. He noted that this was simply an initial response.

If the situation continues to deteriorate, it could potentially cause another rush to gold and a re-test or break of the all-time-high price.