Strong Words by the North Koreans and the U.S Continue to Support Gold

October 10, 2017 - 5:45pm

 by Gary Wagner

Dollar weakness, as well as concerns regarding the current conflict between the United States and North Korea, have been supportive of gold pricing today. As of 4 o’clock EDT, gold futures are trading at $1291, up six dollars (+0.48) on the day. Trading to an intraday high of $1296.70 today, gold prices came within striking distance of $1300.

However, it was dollar weakness that really propelled gold prices to a two-week high today. Spot gold is currently fixed at $1288.40, with a gain of $4.80. On closer inspection, the price change due to dollar weakness alone today was $6.70. Selling in the market resulted in a decline of $-1.90, resulting in the settlement price of $1288.40, according to the Kitco Gold Index (KGX).

Dollar weakness seems to be a carryover from Friday’s jobs report. As reported in MarketWatch, Fawad Razaqzada, a technical analyst at Forex.com said, “The weaker dollar has been the main reason why buck-denominated gold has rallied Tuesday, with the greenback still reeling from Friday’s release of the weaker U.S. jobs report.”

Recent geopolitical tensions with North Korea have resulted in a safe haven play. However, in this instance, the dollar index has weakened, resulting in higher gold prices.

Most recently, reports have surfaced that President Donald Trump will stop at the North Korea – South Korea demilitarized zone to deliver a formidable anti-North Korea speech during his trip to Asia next week. This announcement comes as U.S. Defense Secretary James Mattis told his military officers to be ready in case the U.S. – North Korea negotiations fail.

"Kim Jong-un should take heed of the United Nations Security Council's unified voice, and statements from governments the world over, who agree the DPRK (Democratic People's Republic of Korea) poses a threat to global security and stability," Mattis said.

These events follow statements made last week by President Trump when he referred to a gathering of top generals as the “calm before the storm,” which he followed with a tweet referencing North Korea by saying “sorry, but only one thing will work”

According to military.com, “In another show of U.S. strength, two B-1B Lancer bombers operating out of Guam flew over South Korea on Tuesday ahead of major joint ground, sea and air exercises later this month to demonstrate readiness against North Korean threats. The flyover came on the same day that Jong-un threatened a missile attack on Guam following Trump's "fire and fury" warning to North Korea.”

Lastly, today the Korean Central News Agency, North Korea's propaganda outlet, said the North is "examining the operational plan" to strike the U.S. territory of Guam with medium- and long-range ballistic missiles. KCNA said that a strike on Andersen AFB would "send a serious warning signal to the U.S."

Recent events certainly suggest that the crisis between the United States and North Korea could absolutely get worse before it gets better.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer