Tempered Geopolitical Concerns Shift Sentiment Away from Risk Aversion

Gold is trading unchanged on the day, but only until you factor in dollar strength. As of 3:15 PM Eastern standard time, physical gold is currently trading off by $4.30 and is fixed at $1,344.90. However, the KGX (Kitco Gold Index) reveals that dollar strength accounts for all of today’s $4.30 decline. Market participants have not affected current pricing with regular trading resulting in precisely zero gains and losses.

Gold futures are currently trading at $1,347.70 for a decline of $5.90 (-0.44%). Since Monday of this week, gold has traded in a narrow and tightly defined range with very little change between the daily open and closing price.

Market sentiment continues to focus on tempered geopolitical concerns, with the two most prominent issues including the Syrian use of chemical weapons and the North Korean conflict concluding or easing.

The recent military action by the United States and allies has almost certainly come to a conclusion, with the military strikes which occurred Friday of last week amounting to a “one and done” limited and proportional response.

Recent statements and actions by the administration in regard to participating in a summit between the leaders of North Korea and the United States indicate a real possibility of the conversation occurring. Historically this would be the first time a sitting U.S. president will meet with the leadership of North Korea. The meeting is planned to take place in late May or early June of this year.

According to Reuters, “U.S. President Donald Trump said on Wednesday that preparations were advancing for a first-ever summit with North Korea after CIA director Mike Pompeo visited Pyongyang and formed a “good relationship” with its leader Kim Jong Un.”

Trump tweeted that “Mike Pompeo met with Kim Jong Un in North Korea. Meeting went very smoothly and a good relationship was formed. Details of Summit are being worked out now. Denuclearization will be a great thing for World, but also for North Korea!”

With the threat of further global discord based on these geopolitical hotspots being alleviated or subsiding, market participants have shifted their focus to economic data and the Federal Reserve’s current monetary policy.

Jobless claims decreased to 232,000 in late April, which is near a 45 year low. This indicates a robust job market in which employment is readily available as corporations continue their recent hiring spree.

According to MarketWatch, “Bright as can be. Job openings are near a record high, unemployment is at a 17-year low and scattered, but growing shortages of skilled labor are forcing companies to increase pay or improve benefits to attract or retain employees.”

The combination of these events and economic data has continued to be supportive of a risk-on market sentiment.

Gold pricing must break above the current level of minor resistance ($1,356), as well as major resistance ($1,365) as the next step if this current rally is to continue.

Critical support levels in gold currently reside at $1,337 with major support at $1,325. As long as pricing remains range bound, it will trade between the support and resistance levels indicated above.

Wishing you as always, good trading,