The Daily Market Report: Gold Sets 3-Week Highs, Buoyed by Technicals/Geopolitical Tensions
Gold is up at a 3-week high in U.S. trading as upside momentum in the dollar and U.S. stocks has waned somewhat. The U.S. economic calendar has been quite thin this week, providing little direction to markets in general.
The break of the initial resistance level at 1284.20 is encouraging, but $1300 must really be reclaimed to return confidence to the underlying uptrend that has dominated this year. The yellow metal held above the 200-day moving average and is now back above the 100-day and 20-day, returning a measure of credence to that uptrend.
While today’s gains may be technically inspired, geopolitical tensions continue to be seen as supportive. While President Trump arguably toned down the saber-rattling in his address to the South Korean national assembly, he warned North Korea “Do not underestimate us. AND DO NOT TRY US.” He also revealed that there was a U.S. “nuclear submarine” in the region.
The President is suggesting that our allies in the region buy “massive” amounts of U.S. military hardware to bolster their defenses and serve as a deterrent. However, that is not likely to sit well with China.
Mr. Trump is in China through Thursday and will reportedly be discussing means to contain North Korea with President Xi. Chinese trade practices, that President Trump has deemed “unfair” — will also be on the agenda.
Jim Rickards suggested in a recent interview that he sees war with North Korea as a very real possibility. Obviously this has potentially dire implications for South Korea and Japan and would likely send gold soaring on safe-haven demand.
Meanwhile, tensions escalated in the middle east after Yemeni rebels fired an Iranian made missile into Saudi Arabia. “We see this as an act of war,” said the Saudi Foreign Minister. Saudi Arabia threatened retaliation, saying that the country “reserves its right to respond to Iran in the appropriate time and manner, in accordance with international law and based on the right of self-defense.”
Gold is the classic hedge against geopolitical uncertainty and tensions are running pretty hot right now between two nuclear powers. Do you have enough protection, in the form of physical gold, should the unthinkable happen?