North Korean missiles blast off gold prices
By Yann Quelenn
Gold has clearly broken through its previous, strong resistance at $1300 per ounce, soaring up to its highest level since 2016: around $1317. We believe the inflation trade is back on track, so it is now time to reload positions on gold and silver.
The trigger was North Korea’s provocative decision to fire a ballistic missile directly over Japan yesterday, which threatens to spark military confrontation. But there are economic and financial factors also at work. The US stock markets are flagging, with the S&P 500 slipping to 2440 from 2480 to 2440, suggesting investors find stocks to be overpriced. The dollar continues to weaken, as the US Federal Reserve Bank seems to be dithering on its promises to ‘normalise’ interest rates. The US central bank had been indicating a third boost before yearend, but now markets are assuming this will not happen.
North Korean missiles scare investors, temporarily weakening USD
By Arnaud Masset
Although Kim Jong-un’s missiles are keeping armies on their toes, we still believe the USD is oversold in the medium term.
Nonetheless, the North Korean strongman’s display of power yesterday – firing rockets directly over Japan - has frightened investors into safe havens. The Swiss franc and the Japanese yen rose 0.90% and 0.75% against the USD. Gold shot up 1.15% on the day.
Potential buyers are also unnerved by President Trump’s warning that he might shut down the US Federal Government if the American Congress refuses to fund his proposed wall along the Mexican border. The massive flooding of the Houston – America’s fourth largest city – by Hurricane Harvey did not help, either. The USD extended losses; the dollar index broke its 91.91 support level to its lowest mark since May 2016. Traditionally, the greenback is considered as a ‘light’ safe haven, but now, this seems not to be the case.