Price of Gold Fundamental Daily Forecast – North Korean Tensions Underpinning Market
Gold futures spiked to their highest level in almost 12-months as safe haven assets continued to draw the attention of investors against a backdrop of ongoing concerns surrounding North Korea and the increased possibility of a nuclear war.
December Comex Gold settled at $1339.40, up $9.00 or +0.68%.
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Monday was a U.S. holiday so there was no trade in the U.S. futures markets. There was a limited trade in the electronic market however.
The driving force for all of the price action in the markets on Monday was the North Korean event. Investors reacted the same way they did when the rogue nation launched a missile over Japan last week.
Nervous investors sold the higher yielding U.S. equities and the U.S. Dollar. They also bought the lower-risk, lower-yielding Japanese Yen, Gold and U.S. Treasurys.
Needless to say, both volume and volatility were well-below average. This led to tight trading range and very little follow-through to the upside after the initial gap-higher opening.
Forecast
Gold prices are trading slightly higher early Tuesday after straddling yesterday’s close. A slight uptick in the U.S. Dollar and firmer equity markets are helping to limit gains. If the rally continues to gain traction today, then $1353.00 will become the primary upside target.
Although the market has backed off from yesterday’s high, it is still being underpinned by tensions over North Korea. Traders are being influenced by aggressive talk from the United States.
On Monday, the United States accused North Korea’s trading partners of aiding its nuclear ambitions and said Pyongyang was “begging for war”. President Trump also agreed “in principle” to scrap a warhead weight limit on South Korea’s missiles in the wake of North Korea’s test, according to the White House.
Finally, the U.S. wants the United Nations Security Council to vote next Monday to impose “the strongest possible” sanctions on North Korea, U.S. Ambassador to the United Nations Nikki Haley said on Monday.
Gold is being primarily driven by geopolitical events at this time, but it could move on Tuesday in reaction to several speeches from key FOMC members. Traders will be listening for clues as to the timing of the next Fed rate hike, which the market seems to be indicating will be sometime in mid-2018.
FOMC Member Lael Brainard is scheduled to speak at 1200 GMT. The most dovish FOMC Member Neel Kashkari will deliver his speech at 1710 GMT and FOMC Member Robert Kaplan will speak at 2205 GMT.
Dovish talk will send the dollar lower and likely support gold prices.