The Market Giveth and Yellen Taketh Away

Over the last two days, we have seen gold prices oscillate dramatically, gaining 1.2% yesterday, only to see prices decline by almost a full percentage point today.

Yesterday’s upside surge was the result of increased tension in the current conflict between North Korea and the United States, as the war of words escalated to yet a new level. The uptick in gold prices yesterday was in tandem with a stronger U.S. dollar providing headwinds and limiting yesterday’s move. Spot gold closed up approximately $14 on the day, this after taking into account $-7.50 which was directly attributable to a strong U.S. dollar.

Today comments made by Janet Yellen underscored the real possibility of one final interest rate hike this year. In a speech to the annual conference of the National Association for Business Economic in Cleveland, she said that “gradually raising interest rates is the most appropriate policy approach amid higher uncertainty about inflation.”

However, in her attempt to thread the needle, she acknowledged that the Fed might have to adjust the timing of its interest rate policies. Currently, the Fed funds futures reveal that traders believe there is approximately a 78% chance of an interest rate hike in December.

Statements made during her speech today gave a moderate boost to the U.S. dollar index which is currently trading up 0.036% at 92.80. At the same time, her words today put strong pressure on gold pricing. As of 4:15 EDT, gold futures are currently trading off by just over $13 at $1298.10.

Even with today’s selloff in gold pricing, it must be noted that the current conflict and crisis between North Korea and the United States is far from over. The war of words continues, as North Korea suggested that a tweet by President Trump this weekend was a declaration of war, and as such gives North Korea the right to shoot down US warplanes flying in international airspace. This was followed by a statement calling such a statement “absurd” by the United States ambassador to the United Nations.

Today President Trump said that the U.S is prepared to use “devastating” military force against North Korea but encouraged the world to work together to and the country’s nuclear program, according to Bloomberg Politics.

Inasmuch as citizens of the free world desire North Korean to halt its current nuclear proliferation program, the government of North Korea has continued to ramp up development. They continue to work towards their goal of having a nuclear warhead mounted on an ICBM missile that can strike the mainland of the United States.

Wishing you as always, good trading,