Market Shock: Gold Surges as Maduro Is Captured
Gold prices surge and defence stocks rally as geopolitical risk rises after the US captures Venezuela’s Maduro, shaking global markets.
Investor concerns over geopolitical risks intensified after Venezuelan President Nicolas Maduro was reportedly detained by the US, driving up prices of precious metals and defense stocks.
Gold rose by nearly 2.4% to $4,433 (£3,293) per ounce, while silver prices increased by 4.9%, as money flowed into so-called "safe-haven" assets.
Defense stocks across Europe also rose in response to the weekend's events, amid expectations of increased military spending.
Oil prices were little changed, but shares of US energy companies rose in pre-market trading on hopes they would gain greater access to Venezuela's oil reserves.
Prices of precious metals like gold and silver often rise during times of uncertainty as they are considered safe assets to hold.
Gold prices saw their best annual performance last year since 1979, rising by more than 60% to reach an all-time high of $4,549.71 on December 26.
This surge was driven by several factors, including expectations of further interest rate cuts, large purchases of bullion by central banks, and investor concerns about global tensions and economic uncertainty.
Oil prices fluctuated in early trading on Monday as investors weighed whether Washington's intervention in Venezuela would impact crude oil supplies. Brent crude rose just 0.5% to $61.06 a barrel as analysts said ample global supply would offset any disruption.
However, shares of US oil companies surged in pre-market trading, with Chevron – the only US company currently operating in Venezuela – rising by more than 7%. US President Donald Trump has vowed to exploit Venezuela's vast oil reserves after Maduro is removed from power, saying the US will "run the country until we can get a safe, fair, and prudent transition."
However, industry analysts said the move is unlikely to have an immediate impact on the amount people and businesses pay for energy.
Experts also said that repairing Venezuela's oil infrastructure, which has been in rapid decline since the early 2000s, would cost billions of dollars.
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Vasu Menon, investment strategist at OCBC Bank, said Venezuela's crude oil production has been "weak" for years and now accounts for only about 1% of global oil production. Lord Browne, former chief executive of BP. Today programme that it would take "a lot of skill, investment and time" for Venezuela to restart its oil production.
He added that while some production could "increase rapidly," output could actually fall while the industry is being reorganized.
Defense stocks across Europe surged following investor reaction to the US action in Venezuela.
In the UK, shares in BAE Systems rose by 4.6%, while Germany's Rheinmetall saw a 7.5% increase.
Russ Mould, investment director at AJ Bell, said: "The heightened geopolitical tensions we saw last weekend would normally spook investors, but there wasn't a sell-off in global markets." "When tensions rise between two countries, defense stocks often climb, as investors believe these events may prompt governments to spend more on military security.
He added, "It was natural to see demand in this sector after the Venezuelan leader was apprehended."
Shares of mining firms also rose following an increase in precious metal prices, with both Endeavour Mining and Fresnillo gaining more than 4%.
Asian stock markets rallied as investors largely shrugged off news related to the developments in Venezuela.
Japan's Nikkei 225 was up 3% on the first trading day of the year, and new data showed that manufacturing activity remained stable in December.
South Korea and China's benchmark indexes were also higher.
Xavier Wong of investment firm eToro said the surge reflected confidence that the impact of the events in Venezuela would be contained.
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