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Lackluster Performance in Gold Despite Geopolitical Uncertainty

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Gold did not exhibit any real follow-through buying after Friday’s dynamic upside move. On Friday gold futures traded from $1271 and closed at approximately $1281 with a respectable $10 gain. As trading began yesterday in Australia gold prices firmed and traded to a high of $1287.40 before prices retraced. As of 4:17 PM Eastern standard time the most active June 2019 futures contract is currently fixed at $1281.50 which is a net gain of $0.20 on the day.

Although there are many fundamental factors which could and should have moved gold pricing moderately higher today, traders and market participants were clearly lacking any strong conviction as they bid the precious yellow metal slightly higher on the day.

On the geopolitical front it was reported that North Korea resumed its missile tests firing a short-range ballistic missile this weekend. A report by NBC News said that “North Korea appears to have tested a new short-range missile — and President Donald Trump's resolve to keep it from doing more of the same in the future. The test early Saturday was quickly played down by Trump and his top advisers, who noted it was not the kind of long-range missile leader Kim Jong Un has refrained from launching since 2017.”

There were also reports of over 600 rockets being fired into Israel. According to CNN, “Twenty-three people have died in Gaza as a result of the fighting between Israel and Gaza militants since Saturday morning, according to the Palestinian Ministry of Health. In Israel, four people have been killed by rocket fire from Gaza, according to local hospitals and emergency services.”

Global equities markets experienced dramatic declines in trading on Monday. The Chinese equities markets lost over 6%, the largest single day drop in three years, as their currency fell as much as 1.3% against the U.S. dollar following a series of tweets by President Trump.

The Chinese trade delegation has said that they will return to Washington to continue trade talks. Bloomberg News reported that “While a spokesman for China’s Ministry of Foreign Affairs said Monday that a delegation was still preparing to travel to the U.S. for talks, he didn’t answer a question about the date or whether the group would be led by the vice premier.”

This following a Trump tweet on Sunday which put any real progress into question. “The Trade Deal with China continues, but too slowly, as they attempt to renegotiate,” Trump wrote in a tweet on Sunday. “No!”

This also put tremendous pressure on U.S. equities, taking the Dow Jones industrial average over 400 points lower before staging a recovery. The Dow closed off by only 66 points and is currently at 23 6438.48, after trading to a low of 26,033.95.

Collectively these geopolitical concerns should have been much more supportive for gold prices. The fact that gold exhibited fractional gains underscores the lack of safe haven demand.

Wishing you, as always, good trading,

Gary S. Wagner - Executive Producer