Even the most cursory of glances at recent headlines shows a world characterised by tension and uncertainty. Over the weekend, it appeared as if a US carrier group might be poised to respond to North Korea’s military parade and missile launch with force, although it now seems that this may have been a feint as the “armada” was moving through the Indonesian Sunda Strait at the time of Sunday’s failed launch. In any case, though, tensions remain high with the Korean peninsula being only one of the key flashpoints.

In the Middle East, the US’ policy on Syria remains in doubt as an apparent tug-of-war between Washington defence hawks and Trump administration isolationists continues to play out in the wake of the April 7 strike against Syria’s Shayrat airfield. In Europe, the French election remains far too close to call as markets place their hopes with centrist candidate Emmanuel Macron against pushes from the right from Marine Le Pen, the centre-right from Francois Filion, and the Eurosceptic left from Jean-Luc Melenchon. 

As might be expected, the tense atmosphere is boosting gold prices as investors seek safe-havens. Aided by falling bond yields and a softer USD, gold prices are testing multi-year resistance levels around $1,290/oz after having failed to break this long-term downtrend line five times (on an intraday level) last year.

“We see $1,290/oz as a key trendline for gold, and this is where the battle is being fought at present,” states Saxo Bank head of commodity strategy Ole Hansen. According to Hansen, one chart to watch here is that depicting the ratio between gold and copper prices, as precious metals’ gains and industrial metals’ losses.

“We have copper piling up at Chinese ports as gold is supported by falling yields, a weaker dollar, and geopolitical fears, and copper is being dragged lower by the lack of a Trump administration infrastructure plan as well as reform plans from Beijing that will lead to less credit and growth in China,” says Saxo’s commodities head.

“One thing to watch,” says Hansen, “is silver, which is exposed relative to gold with funds holding a record long”. The fact of silver’s being both a precious and an industrial metal could prove the canary in the coal mine for gold, but at this point, Hansen says, any further geopolitical shocks could see XAUUSD make a determined break out of range.

Gold-to-copper ratio:

One such shock, of course, could come from France where a recent surge in the polling data from the leftist Jean-Luc Melenchon has markets worried about a second round contest between Melenchon and the Front National’s Marine Le Pen – a contest that could see market-friendly policy excluded from the French debate entirely.

“Since the founding of the fifth republic in 1958,” says Paris-based Saxo economist Christopher Dembik, “elections have not been a major market driver in France… with one major exception.”

The exceptional case outlined by Dembik is of course the 1981 election, where the election of France’s first Socialist president Francois Mitterand was met with a 20% drop in the CAC 40 index as investors feared what Dembik calls “the spectacle of Soviet tanks rolling through Paris”.

According to Saxo’s Paris-based macro strategist, a Le Pen victory could easily lead to another such rout in French shares.

Across the Channel, London’s FTSE 100 index has been hit by a rout of its own as yesterday’s calling of a snap June 8 election by prime minister Theresa May has seen the index’s year-to-date gains wiped out by a sterling surge that saw GBPUSD rise from the 1.2525 area to north of 1.2850 early this morning.

“Saxo’s equities model has exited its long stance on the FTSE 100,” says Saxo Bank head of equity strategy Peter Garnry, “as the index is strongly inversely correlated to GBP on the preponderance of British firms dependent on foreign profits.”

Beyond sterling, FX markets are watching the AUD decline further on falling commodity prices while bond yields tumble further on the global risk-off mood.

“US 10-year Treasury bonds have rallied out of their six-month range,” says Saxo fixed income trader Michael Boye, “while 10-year German bund yields have hit a new low.”

This morning’s markets, then, are shaky with good reason to be so as risk sentiment continues to track the contours of an increasingly unstable world. As investors seek safe havens across asset classes, analysts are keeping one eye on the fundamentals and another on the news headlines as the next major catalyst could prove, as the old song goes, “just a shot away.”