Gold Holds Steady as Traders Await the Outcome of a Trifecta of Events

June 7, 2018 - 6:19pm

 by Gary Wagner

Gold has been holding steady and trading above $1,300 per ounce (basis the most active August 2018 Comex contract) as it awaits the outcome of three events which most certainly have the potential to shape the future direction of gold pricing, as well as the financial markets as a whole.

The Group of Seven

Beginning on Friday of this week and continuing over the next two weeks, three critical events will occur. The Group of Seven summit will start this Friday in Québec. The summit could result in significant fireworks as many analysts predict that President Trump’s agenda will move forward with his focus on protectionism.

As reported in the Pittsburgh Post-Gazette, “President Donald Trump plans to confront other world leaders at a summit in Quebec on Friday over what he believes is a global economic system tilted against the United States, several people briefed on the plan said, escalating tensions with U.S. allies who have expressed outrage at his pivot toward protectionism.”

The G7 meeting in Québec will be the first opportunity for many leaders to confront and challenge President Trump in person regarding the initiation of tariffs on steel and aluminum. Many analysts in the United States, as well as globally, believe that recent actions by the president have moved to isolate America from the international community.

According to Nicholas Burns, a U.S. diplomat and professor of diplomacy and international relations at the Harvard Kennedy School of Government, said, “We’ve isolated ourselves, we’ve isolated ourselves on the climate change agreement. We’ve isolated ourselves on Iran, and we’ve isolated ourselves now on trade.”

FOMC Meeting

Next week the Federal Reserve will hold its monthly FOMC meeting. It is highly anticipated that the Fed will implement another rate hike. According to the CME group’s FedWatch tool, there is a 91.3% probability that a rate hike will be an outcome of the meeting.

According to The Economic Times, “Historically, gold has rallied five times out of six when the Fed raised interest rates. For now, it has a handy checklist ahead of the Federal Reserve meet. One variable is selloff in gold prices before going into the event. We have already seen price correcting from $1,365 to $1,290. Second is the dollar going higher in anticipation of a rate hike. That is also checked. The dollar index is in an overbought position. “

United States - North Korea Summit

The final event completing the trifecta of events will be the historic meeting between the leaders of the United States and North Korea. With so much at stake for the region and the world at large, any positive outcome would be a major coup and could certainly change the fabric and politics of Asia. This summit could also backfire if the two leaders’ conversation results in increased friction and distrust as opposed to concessions and gains on both parts.

With so much at stake with both the Group of Seven meeting and the United States - North Korean summit, the events will undoubtedly have a profound impact on the future of the current geopolitical fabric. Add to that the economic implications of the upcoming FOMC meeting and this trifecta of events will certainly be a time to remember.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action

Maintain Long August gold @ 1306.80 and a stop @ $1285

Gold Market Forecast

Although the dollar continues to weaken,  outside forces which will occur over the next week will have a profound impact on gold prices.