The Daily Market Report: Gold Retreats Into Range, but Fundamentals Support


USAGOLD/Peter Grant/04-19-17

Gold took another dip right before the London fix, just as it did yesterday. Both sells were reported to be around 25,000 contracts, or $3 bln in notional value. Yesterday’s retreat was fully retraced and then some. So far today, gold is nearly $10 off the intraday low at 1273.20.

Technicians are watching a downtrend line drawn of the all-time high and someone may have a vested interest in not seeing that line breached. On the spot chart, the trendline has already been negated, although a move above $1300 would lend credence to the breakout.

Despite the intraday pullback, a plethora of fundamental factors continue to offer support to the yellow metal: Rising geopolitical tensions. New Brexit uncertainty associated with the snap election called yesterday. French elections. U.S. growth risk. Ebbing rate hike expectations. And calls for a weaker dollar by President Trump.

That all conspires to generate a rather considerable tailwind for the gold market.

There was more saber rattling from North Korea this week. “If the US is planning a military attack against us, we will react with a nuclear pre-emptive strike by our own style and method,” threatened DPRK Vice-Foreign Minister Han Song-ryol earlier in the week.

Without a delivery vehicle capable of reaching the U.S., presumably that nuclear strike would be against a U.S. regional ally; South Korea or Japan. Any such move would likely result in all-out war.

Certainly, we hope that the situation can be deescalated, but there seems to be a death of ‘cooler-heads’ at this point. Hopefully China can pressure Pyongyang to back down.

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