Gold Trades Under Pressure in Light of a Better Than Expected GDP Report
Last night’s announcement that the U.S.-North Korea denuclearize talks, had for the most part come to a unexpected ending after both leaders failed to reach an agreement. This summit or negotiation was an effort by the United States and allies to curb or end North Korea’s objective to become a nuclear power.
According to President Trump these talks hit a stalemate when North Korea asked for the current sanctions to be lifted in their entirety. The North Korean leader pledged to dismantle the North’s Yongbyon nuclear complex. This complex contains a reactor and plutonium reprocessing plant.
Trump’s responded at a news conference where he said North Korea was “willing to denuke a large portion of the areas we wanted, but we couldn’t give up all of the sanctions for that.”
According to the president “current sanctions on North Korea will remain in place, but he said that the country has “tremendous potential”, calling Kim “quite a guy and quite a character.”
That news caused gold to run to its high in trading last night of $1329.90.
Bullish Sentiment for Gold Shifts Quickly After the Release of the U.S. GDP
MarketWatch released a poll of economists which forecasted a tepid 1.9% growth rate. However, the GDP numbers were strong indicating that there was a 2.6% growth rate in the fourth quarter, coming in well above economists’ expectations.
According to MarketWatch because the GDP numbers were better than expected, Scotiabank Economics advised clients, “to continue to downplay market pricing for federal reserve interest rate cuts,” Scotiabank Economics said it’s “forecast remains pointed towards a return to modest tightening later this year.”
Of course, such a move, if correct, would have a bullish impact on the dollar as interest rates move higher and a bearish effect on the safe haven metal gold.
Currently gold futures are trading under pressure down seven dollars on the day, with April futures currently fixed at $1314.20.
Our technical studies indicate that there is minor support at $1312 per ounce, and major support at $1300. These studies also indicate that currently resistance resides at $1331, with major resistance at $1350. Both of these price points are former highs of the year.
Wishing you as always, good trading,