Safe-haven assets have been much in demand since the drone attacks on Saudi oil facilities have killed investors’ risk appetite. In fact, escalating Middle East tensions continue to propel demand for safe-haven securities since the market has already been grappling with the global economic slowdown and U.S.-China tariff disputes.
Oil Prices Spurt After Saudi Attack
The drone strikes have compelled Saudi Aramco, the biggest oil producer in the world, to suspend daily production of 5.7 million barrels of crude. The loss is equivalent to roughly 6% of the global oil output.
The disruption in crude supply has pushed the West Texas intermediate (WTI) crude futures roughly 15% higher to $62.90 a barrel. This marked the largest increase in a day for the commodity in 10 years. The Brent crude also moved north to settle at $69.02 a barrel. Notably, the 15% gain in the global oil benchmark is the highest on record.
Will it Weigh on US Consumer Spending?
The recent strike has raised concerns among investors of more attacks on Saudi Arabia amid intensifying Middle East tensions. Thus, there are possibilities of a further spike in crude prices. The sustained rise in energy prices could significantly lift room heating bills and reduce disposable income of consumers.
Since, consumer expenditure primarily drives the U.S. economy, any curtailment in spending by domestic consumers will hurt the economy which is already under the threats of a global economic slowdown and Washington-Beijing trade dispute.
Gold Stocks Shine
Investors are also apprehensive that the consistent rise in oil prices will lead to sustained inflationary pressure. In fact, the Fed is likely to consider this before opting for a second rate cut, following the first one in July since 2008, to protect the domestic economy from a global economic slowdown.
Amid the widespread market uncertainty, it would probably be safe for investors to pick gold stocks which are considered safe haven as they can maintain or increase in value during market turmoil.
We have employed our proprietary stock screener to shortlist potential gold stocks carrying either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Headquartered in Toronto, Canada, Alamos Gold Inc. (AGI - Free Report) is primarily exploits gold and silver reserves. The #1 Ranked company is likely to see earnings growth of 324% and 5.7% in 2019 and 2020, respectively.
Franco-Nevada Corporation (FNV - Free Report) , headquartered in Toronto, Canada, is primarily a royalty company with focus on gold exploration. In 2019 and 2020, the Zacks #1 Ranked stock is expected to witness earnings growth of 33.9% and 18.8%, respectively.
Headquartered in Toronto, Canada, Kirkland Lake Gold Ltd (KL - Free Report) is mainly engaged in exploration and production of gold. In 2019 and 2020, the company with a Zacks Rank of 1, is likely to see earnings growth of 75% and 15%, respectively.
AngloGold Ashanti Limited (AU - Free Report) , headquartered in Johannesburg, South Africa, is among the largest gold miners in the world. For 2019 and 2020, the Zacks #1 Ranked stock is likely to see earnings growth of 155% and 60%, respectively.
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