Once again the free world shook its collective head when terrorists struck Paris last week. Once they processed this tragedy, those who buy and sell gold looked beyond the tragedy to make an assessment as to what the event would do to the markets. The answer to that question actually has several layers of the onion to peel back.

Complexities upon Complexities

First, as we have noted here, the market has been grappling for months over the confusion that exists because of a number of issues. The Federal Reserve Bank action or inaction is chief among those concerns. Interestingly, the price of gold actually rose briefly this week when the minutes of the October FOMC meeting. This occurred in spite of strong indications of a December rise in this fundamental benchmark.

The London spot price moved from an opening of $1,064 an ounce to $1,070 after the market had a chance to view the minutes. This activity followed the safe haven rally that followed the Paris attacks, and gold seemed to settle in near its five-year low of $1,073.

Rate Hike Already Taken into Account?

Many see this movement as a further indication of the reality that a probable rise in rates has been effectively priced into the market price of the precious metal. Peter Schiff of Euro Capital has been tracking this issue closely and notes, “…having allowed markets to take firm hold of the belief that it would [raise] the Fed would lose all credibility (if it does not act in December). Investors would rightly conclude that the Fed was bluffing all along, and that we are stuck at zero for the foreseeable future. This would surely ignite a gold rally for the ages.”

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To a number of analysts like Schiff, this indicates gold may, in fact, face a rise in the offing. At the same time, others explain the bump up by pointing to the dip in the U.S. dollar, affecting gold as a popular hedge for the currency. Of course, there are doubters who still point to the possibility of a $1,000 bottom if there is more than a very nominal rise in the Fed rate.

Impact of Terrorist Attack on Paris?

The shakiness caused by Paris plunged the market into a brief drop the Monday after the attacks. However, as it did after earlier attacks in London and Spain, investors in gold and other commodities shook off the emotions and initial reactions of fear.

This latest event, however, leaves many asking what will happen if the terrorists are successful in launching even more attacks in the near future, especially in the United States. Back to the Fed, any immediate attacks would certainly play into the Schiff scenario if they resulted in the anticipated rate rise being delayed.

In the final analysis, gold is the only true safe haven investment for many in the markets, and will always be a first resort during times of major unrest. That is only one reason one respected gold fund manager, Frank Holmes, sees the possibility (probability?) of a $1,350 an ounce target for end-of-year trading. According to an interview with MarketWatch, Holmes cites four reasons for buying gold now: “…shrinking real interest rates in the U.S., a dip in the dollar that led to a so-called ‘death cross’ formation, a jump in the global purchasing managers’ index and signs of increased demand from China.”

With hopes and prayers we will see no near-term repeats of the Paris tragedy, the gold market has enough issues to sort through to end the year on a positive note.