Global markets shaken by Middle East tensions: will gold set a new high for 2023?

With the escalating situation in the Middle East grabbing international attention, financial markets are witnessing a widespread sense of unease. This apprehension is clearly mirrored in the prices of gold and oil, as well as the Volatility Index (VIX). Although there has been a partial reduction in unrest after the chaos of last week, the atmosphere remains tense as events continue to unfold.

Gold Prices: Predictions Amid Uncertainty

In the economic backdrop, gold (XAUUSD) has behaved as the classic refuge amid uncertainty, soaring from $1,810 to $1,933 per ounce in just over a week. Technical analysis suggests a wedge pattern, potentially building toward a significant $2,131 pinnacle, contingent on further escalations in the Middle East and a break to the September 20 high of $1947.55.

However, considering the near-vertical recent rise, the precious metal's trajectory might not be linear, necessitating a possible consolidation or retracement as investors catch their breath and reassess.

Oil, the VIX, and potential market repercussions

Not to be overshadowed, Brent oil (BRENT) prices persist in their ascent, anchored by the October low of $83.42, underscoring the broader inflationary concerns shadowing the global economy. Simultaneously, the VIX, or fear gauge, has punctured its own ceilings, achieving peaks not observed since May 2023. A potential 50% surge looms, aligning with burgeoning worries of the conflict's spill-over. This trio of trends - escalating gold, advancing oil prices, and a climbing VIX - signal potential downturns for major indices like the S&P 500 (SPX500).

Depending on how the situation unfolds in the Middle East and the subsequent reaction from other nations, the global economy may experience a significant impact.

Gold daily chart