Without doubt, it is a VUCA world characterised by volatility, uncertainty, complexity and ambiguity. As if geopolitical tensions, looming trade war and elevated crude oil prices were not enough, political uncertainty in the eurozone is taking its toll on various asset classes.

The markets – equity, currency and commodity - are buffeted by political developments in Europe, especially relating to Italy and Spain. There are fears of a sovereign debt crisis in Italy which can potentially spill-over to others. Spain risks facing new elections if the current prime minister fails to win the vote of confidence. These developments have shifted the focus away from the US policies and oil prices to the precious metal gold whose proverbial luck continues; and it comes at a time when the metal came under downward pressure with the price falling below the psychological level of $1300 an ounce last week. Gold is a beneficiary of the new Europe-centric uncertainty given its safe haven status. Price in Euro is up by about 1.5 percent to about €1120 a troy ounce. Risk-averse investors are expected to flock to the yellow metal. But typically, upticks in commodity prices triggered by political instabilities are transient. So, one can expect the market to correct when normalcy resumes.

Without doubt, tensions between the US and North Korea continue. Despite a small move lower in the last four days, crude oil stays at around $ 75 a barrel. But these are are already factored into the yellow metal price. However, goldstory relates to the demand. Import demand in China and India is falling. The Swiss gold export data have confirmed that demand for the yellow metal is muted in Asia. From Switzerland, at about 44 tonnes, gold export to China and Hong Kong has fallen to a six month low in April. Likewise, export to India has also declined to about 26 t last month. Importantly, Chinese central bank has reportedly not bought any more gold for months. Going forward, it is nearly certain that the US Federal Reserve will hike interest rate once again in its June meeting. In the event, the dollar is likely to strengthen (unlike after the March hike) and the US equity market will get a boost.

Upside for the yellow metal will be capped and the market will likely come under downward pressure as less committed gold bulls are likely to exit their positions and move funds away. So, $ 1300/oz seems to be a barrier gold will find tough to breach any time soon unless VUCA conditions worsen. Interestingly, in recent weeks, silver has outperformed gold. This is evidenced by the fall in the gold/silver price ratio to 78. Silver is used in industrial applications and the recent strength in industrial metals prices appears to have given a boost to it, experts assert.

The author is a commodities market specialist. Views are personal