Gold prices surged as risk aversion swept financial markets. Haven-seeking capital flows pushed up Treasury bonds and sent yields lower while the priced-in 2017 Fed rate hike outlook implied in futures markets flattened. This bolstered the relative appeal of non-interest-bearing assets including the yellow metal.

A risk-off mood may continue to translate into gold gains as US Secretary of State Rex Tillerson travels to Russia, where a diplomatic showdown looks likely after last week’s missile strike against Syria. Indeed, S&P 500 futures are down alongside local bourses in Asian trade, hinting that investors remain on edge.

While Tillerson’s rhetoric hardened at a G7 meeting this week, he also reportedly questioned “why US taxpayers should be interested in Ukraine”. That may hint at a possible bargain that has Russia trading some easing of Ukraine-linked Western pressure for dialing back support of Syrian leader Bashar al-Assad.

Signs pointing to the emergence of such an accommodation may be interpreted as de-escalation by investors, opening the door for a recovery in market-wide sentiment. That may see rates rebounding as Treasuries retreat, putting gold prices back on the defensive.

Crude oil prices continued to march higher amid reports that Saudi Arabia will support extending last year’s OPEC production cut accord into the second half of the year. API reported that US inventories lost 1.3 million barrels last week, helping to push prices upward.

If signs of a fledgling understanding between the US and Russia trickle out, easing supply disruption fears may weigh on energy prices. Selling pressure may be tempered if EIA inventory data falls closer in line with API’s estimate than the consensus forecast calling for a smaller 772.2k barrel weekly draw.

Will gold prices continue to rise in 2Q? See our forecast to find out what’s driving market trends!