Gold Performance Lackluster in Light of Geopolitical Hotspots

April 10, 2017 - 5:42pm

 by Gary Wagner

Given recent events in Syria, as well as genuine concern over North Korea’s nuclear ambitions, gold is reacting in a rather subdued and lackluster manner. Although trading well off today’s lows as of 4 o’clock EST, gold futures are trading off by approximately one dollar at 1256.30. Even though the U.S. Navy is currently sending a major strike group towards the Korean Peninsula, safe haven assets such as gold and the U.S. dollar remained flat on the day.

According to the Washington Post, “A U.S. Navy strike group led by the USS Carl Vinson aircraft carrier was making its way toward the Korean Peninsula on Sunday “to maintain readiness” as Kim Jong-un’s regime in North Korea prepared to mark key anniversaries in the coming weeks.”

Last week’s military action by the United States, in response to Assad’s gassing of his own population, immediately moved gold to higher ground. However, it was short-lived, at best, as gold prices softened shortly thereafter.

There could still be real repercussions resulting from last week’s actions. As reported in the Telegraph, “Russia and Iran have threatened military retaliation against the U.S., accusing Donald Trump of crossing “red lines” by ordering a cruise missile attack on a Syrian air base.”

Based on recent activity in the precious metals markets, it appears market participants are not reacting in any significant manner to the events which occurred last week. There also seems to be little reaction to the news that the United States is sending a Navy task force into the Korean Peninsula.

According to Kitco News, “The world marketplace is not showing a significant reaction to the weekend news that the U.S. is sending a Navy task force to waters off North Korea, to conduct exercises with the South Korean navy. Still, the tensions between North Korea and the U.S. are on the rise and this matter could be the next major geopolitical crisis that would have a major impact on world markets, and be bullish for the gold market.”

While recent events have triggered strong upside price movements in gold, they have not been able to sustain those price increases. On a technical basis, we have identified strong price resistance at approximately 1261 in gold. On Friday, gold prices surged to an intraday high at just above 1270 per ounce. However, those gains quickly eroded intraday as traded gold fell below the critical price support level of 1260. Still, it is the belief of many analysts that the tight range exhibited in gold prices point to a potential breakout if gold can trade and close above the current resistance level at 1260.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action
 
We pulled profits this morning when our stop was hit on our long gold trade. All stops were hot at 1251
For those trader that were in from 1237- in at 1237 out at 1251 for a profit of $14.00 or $1400 per contract.
For those trader that were in from 1250 - in at 1250 out at 1251 for a profit of $ 1.00 plus $10.00 (from last trade) for a total of $11 or $1100 per contract.
 
 
 
Gold Market Forecast

Based upon our current technical informationIt seems most likely that gold is currently in a period of consolidation, rather than atop.

However until the point in which gold can effectively trade above and close above 1260 our current level of resistance we will most likely remain sideline awaiting our next signal.