Gold prices shot higher by over 1% in risk-off start to the week

• Gold spikes to $1,506 from $1,488.75 the low on  Saudi Arabia headlines. 
• 6% of world oil supply cut off following the attack on Saudi Arabia’s oil and gas facilities.

Gold prices have shot higher in the open this week due to the increased tensions in the Middle East following the attack on Saudi Arabia’s oil and gas facilities in Abqaiq which has suspended half of the kingdom’s processing, corresponding to 6% of world supply. Gold jumped 1.2% in the open, travelling to a high of $1,506 from $1,488.75 the low following a weekly decline of 1.1%. last week. 

"Saudi Arabia’s oil production was cut in half after explosive drones attacked Aramco’s Abqaiq plant and set it ablaze," analysts at ANZ Bank explained:

"The plant is a major source of supply and a prolonged outage as a result of the attack has the potential to negatively impact global energy markets. That said, Saudi Arabia and US officials are reportedly prepared to dip into their reserves to offset supply impacts in the interim. Saudi Arabia’s oil fields have been the target of a number of drone attacks over the past year, with Yemen’s Houthi rebels claiming responsibility for the latest attack."

However, while the news alone is a blow for risk appetite, gold was already poised to the upside considering the underlying global economic weakness, dovish central banks and shortages of safe-haven assets which still suggests the path of least resistance for gold is higher.

Fed in focus

This week will be critical for Gold with the Federal Reserve in mind, priced in by the market to cut a further 25 basis points. " It will be justified as insurance to mitigate the trade and global headwinds facing the economy. Rising inflation and a strong consumer mean anyone expecting a more dovish message will be left disappointed," analysts at ING Bank argued.

Gold levels

Gold has been offered below the 21-day moving average around a 38.2% Fibonacci retracement around the 1490 mark. However, bulls are back in lay while on the 1,500 handle but will need to get back above 1,550 which then guards prospects for 1,590 as the 127.2% Fibo target area.