Oil, Gold, and Volatility ETFs Slide As Syrian Tensions Cool

etfs etfsMany investors have been keeping a keen eye on the conflict in Syria and the prospect of escalating tensions in the region. Fears grew recently that the conflict could drag in Western powers, while Russia has vowed to support the Assad regime in Syria even if the West attacks.

Beyond this, concerns have also been growing that a strike led by the U.S. would lead to a wider conflict in the region, dragging in the likes of Iran or Israel, and possibly other nations in the area as well. As you might imagine, this has had a decidedly negative impact on stock prices lately, as the uncertainty and the possibility of a conflict are not exactly welcomed prospects to investors (also see Defense ETFs to Watch in Syrian Crisis).

However, there might have been somewhat of an accidental breakthrough when U.S. Secretary of State John Kerry suggested that if Assad turned over his chemical weapons, that he could avoid a U.S. strike. While many believed that this was unlikely to be met with support from the Syrian regime, it appears as if both Assad and his ally in Russia, Putin, are on board with the idea.

Market Impact

Investors seemed to take these reports at face value and breathed a sigh of relief over the news. It appears as though, at least for now, external involvement in Syria’s civil war will be limited, greatly decreasing the risk of a wider conflict, and also limiting the appeal of safe havens in the session.

This specifically caused the decline of a few segments of the financial world which had been seeing some solid trading as of late. Below, we highlight a few of the biggest losers from this report, which may continue to struggle should tensions cool in the region:

Gold

Gold is often viewed as a store of value and a hedge against market turmoil. The product has seen some strength lately thanks to concerns over widespread fighting in the Middle East, and was up nearly 5% over the past month before today’s report.

ETFs tracking gold bullion such as (GLD) or (IAU) lost about 1.6% following the news about the chemical weapons plan, pushing these lower than the overall market on the day. Gold miners also struggled—as their main revenue source lost some of its value—while both bullion and miners could see weakness if more steps away from the brink of war are taken in the near term.

Volatility

Volatility investments like (VXX) have a pretty terrible reputation for long term investors. Prices for these types of products tend to lose value over time thanks to a contangoed market, and a steep roll cost.

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