Tensions Subside as Gold Prices Retreat Moderately

After last week’s dynamic upside surge of roughly $40 from the low of the week, today’s moderate selloff does not change our overall view and bullish demeanor in gold. Gold today traded to a low of 1284, and as of 4 o’clock EDT is trading at 1287, down seven dollars on the day, a loss of just over a half a percent.

Although there has not been any change regarding the current tension between the United States and North Korea, there is perception that this tension has eased. This could be because there have been no new threatening statements issued by either the United States or North Korea. This absence of saber rattling, coupled with strong U.S. equities markets and a strong U.S. dollar, created the necessary pressure for gold prices to retreat moderately.

This weekend the Secretary of Defense Jim Mattis, along with the Secretary of State Rex Tillerson, spoke to the Wall Street Journal conveying that the current administration is looking at diplomatic solutions to achieve their goal of a non-nuclear North Korea.

According to Fox News, “In response, the Trump administration, with the support of the international community, is applying diplomatic and economic pressure on North Korea to achieve the complete, verifiable and irreversible denuclearization of the Korean Peninsula and a dismantling of the regime’s ballistic-missile programs. We are replacing the failed policy of “strategic patience,” which expedited the North Korean threat, with a new policy of strategic accountability.”

U.S. equities rebounded with a fever today, the Dow Jones Industrial Average closed just 10 points shy of that elusive 22,000, settling today at 21,990 points. The Dow Jones Industrial Average gained roughly 6/10 of a percent, but by far it was the NASDAQ Composite that quickly made up ground given back last week. The NASDAQ Composite closed up almost 80 points on the day at 6336, a net gain of over 1 ¼%. The Standard & Poor’s 500 gained a full percentage point to close at 2465.

Considering that gold ran to a nine-week high last week, and came within two dollars of $1300 per ounce, today’s lower pricing has not caused any major technical damage. As such, the question becomes whether or not gold prices can hold the current level of support, which on a technical basis sits at about $1280 per ounce.

While there is certainly a lull in tensions between the United States and North Korea, only time will tell if North Korea will make good on its threat to launch four missiles towards Guam. Such an act would immediately rekindle the massive tension that has unwound slightly over this weekend.

Wishing you as always, good trading,