Marex Spectron Bullion Thoughts

I have been quiet as of late because there has really been nothing to say of any interest. I said in my last note that the range remains 1200-1300 and that hasn’t changed. Gold was and still is slavishly following the dollar, in particular dollar yen. For a while now we have had zero outside influence apart from the dollar and as such, the market has been horribly dull. However, it would seem that we may have found another thing to watch now in the shape of the latest North Korea/US spat. I know this has been rumbling along for a while, but the rhetoric seems to be getting more aggressive and with the two antagonists, namely Trump and Kim Jong Un, both not being the most calm of characters, this could escalate quickly. Interestingly although gold has risen overnight in response to this, the market is certainly not positioned for some form of attack or God forbid, war. I remember back in January 1991, in the run up to the first Gulf war, gold had steadily risen for months. The very day the attack was launched, the price fell forty dollars in a straight line. Bear in mind the price of gold at the time was 400 dollars, so this was a very quick ten percent move, proving the old adage of buy the rumour , sell the fact. But this time, the market has risen over the last few weeks on the back of a weaker dollar rather than the fear factor, so if something does actually happen I think we could see quite a big knee jerk reaction on the upside, probably breaking the 1300 resistance level.

I have said all year that one should hold gold on the basis of the Trump presidency and various other geo-political factors and this is exactly why. I fervently hope that nothing happens and that the US and North Korea can come to some form of peaceful resolution with each other, but none the less keep a wary eye on these developments.

In the meantime, watch the dollar as per usual for any short term moves. Today sees little in the way of major economic figures.