Marex Spectron Bullion Thoughts

Yesterday was a classic example of what I have been talking about recently. The gold market gets itself short and forgets that North Korea is lurking in the wings. All of a sudden up pops the NK Foreign Minister and says “the whole world should clearly remember it was the US who first declared war on our country”. This as justification for his other comments in which he said that NK could shoot down US planes even if they were outside Korean airspace. Suddenly the market remembers why it originally rallied and up she goes. Gold moved from around 1295 on December up to 1315, so a quick 20 dollar rally. This is exactly why I said last week that I was surprised at the short term memory of the market, although quite frankly I should have stopped being surprised by anything this market does a long time ago!!

So, although the US has of course denied that it is at war with NK, the crisis rumbles on and with that in the background, it really is not worth being short of gold. Nothing has actually changed since yesterday or since last week or actually since last month as far as this situation goes, in fact I would go so far as to say that tensions are higher now than then. If you think that two weeks ago gold was trading at 1350, it’s performance over the last few days is pretty dismal. This makes me think that , God forbid, if anything concrete actually happened we would be an awful lot higher.

So in summation I repeat, keep buying gold on dips as long as this situation continues. Obviously the other major factor in the price is the dollar and with Yellen talking this evening at 21:45 London time, this will no doubt push the price one way or the other in the short term. To put it simply the gold price will continue to be influenced by two things. Geopolitical concerns and the dollar.  Anything else is fairly irrelevant at the moment.