Gold drops as North Korea tensions subside – for now
Fawad Razaqzada September 11, 2017 6:42 AM
Risk-sensitive assets created large gaps at the start of this week’s trading session in Asia overnight. Index futures gapped up before pushing higher which saw the Dow future gain more than 100 points. In contrast, safe haven gold, which had hit a new 2017 high on Friday, found itself around $15 lower when trading got underway. It looks like speculators who had established positions to take advantage of a possible rise in risk aversion, were left disappointed as North Korea did not conduct another missile test at the weekend. What’s more, a weakening of Hurricane Irma over the US also dampened demand for perceived safe haven assets, and boosted the dollar slightly. However, North Korea tensions could rise again. The United Nations will be voting on new sanctions – proposed by the US – against Pyongyang today. If approved by the UN Security Council, then North Korea stands "ready and willing" to respond with measures of its own, the North's Foreign Ministry has said. So, North Korea tensions are likely to linger which should keep demand for gold and other safe haven assets elevated.
From a technical stand point, gold’s weakness also makes sense, but so far it can only be interpreted as a mere pullback from overbought levels, rather than trend reversal. After breaking above the $1300 level, the yellow metal went on to hit our next key target around the $1350 area, where the top of the bullish channel converged with the 161.8% Fibonacci extension level of the last corrective downswing. But given the prospects of a ‘gap fill’ and the overall bullish structure of price, we wouldn’t be surprised if the metal continues to push higher towards $1375 next – the 2016 high. Short-term support comes in around $1325, followed by $1300. But if gold falls below $1290 then the bulls may be in trouble. Until and unless that happens, or price forms a distinct reversal pattern at higher levels, the path of least resistance for gold remains to the upside despite its immediate-term weakness.
Source: eSignal and FOREX.com.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.