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Did North Korea Just Trigger $1,900 Gold Prices? - TheStreet

Did North Korea Just Trigger $1,900 Gold Prices? - TheStreet

Release Date:  Friday, September 1, 2017

Gold surged past $1,300 this week as North Korea fired a missile over Japanese airspace and the US Dollar Index reached a two-and-a-half year low.

“Gold has surged almost 15 percent this year…as investors weigh the possibility of conflict in Asia, with Kim Jong Un’s regime pushing on with missile tests and U.S. President Donald Trump vowing a stern response.” (Gold Extends Rally to ’17 High As North Korea Test Adds To Angst.” Bloomberg 8.28.17)

Disappointing US economic data also helped boost precious metals prices Friday morning.
“A weaker-than-expected U.S. employment report that put strong selling pressure on the U.S. dollar index is boosting the precious metals markets.” (“Gold Pops To 11-Mo. High After Downbeat U.S. Jobs Report.” Forbes 9.1.17)

This weaker than expected economic data has traders questioning whether the Federal Reserve will raise interest rates again this year.

Gold ended the week up $33.60, closing at $1,325.40. Silver prices closed at $17.80, up $0.65.

Did North Korea Just Trigger $1,900 Gold Prices? - TheStreet
On Monday, gold enjoyed it’s best day of the year, gaining more than $27, moving over the $1,300 mark, signalling a major breakout to the upside as the gold market heads into the seasonally favorable fall months.

“Market consensus for the climb is the latest missile launch by North Korean over Japan. While this may explain the short-term catalyst, gold’s fundamentals have been in place for some time to support a move of this sort …

“Global politics as well as our national politics are loaded with hazards, as the current North Korean crisis demonstrates. Elections in Germany are slated to be held later in September and Chancellor Angela Merkel is fighting off a real challenge from martin Schulz. Meanwhile, the Chinese meet later in the fall as they organize their party leadership for the next five years …

“Here in the United State, Congress has to pass a budget while wrestling with the issues of tax reform and the debt ceiling …

“Gold is also moving higher as the dollar continues to weaken. This trend has been in place for almost a year now and shows no signs of abating. The Trump administration has been pursuing a weak dollar policy form its outset to advance U.S trading goals. Regardless of the wisdom behind the policy, a weaker dollar translates to higher gold prices …

“Finally, interest rates are always a major diver of gold prices. Low real rates support gold as investors choose to leave riskier monetary instruments when they are not being paid to hold them through higher rates. The current low interest rate environment coupled with political risk and monetary uncertainty create a very favorable environment for gold ownership. (“Did North Korea Just Trigger $1,900 Gold Prices?.” TheStreet 8.29.17)

Gold Shines As Washington Stumbles – Business Insider
Gold’s performance, up 12% year-to-date, is particularly interesting and two trends are standing out.

1) Real Rates Have Flattened Out
“Gold is most correlated with real interest rates, not nominal rates or inflation. While real rates rose sharply during the back half of 2016, the trend came to an abrupt halt in early 2017. U.S. 10-year real rates ended July exactly where they began the year, at 0.47%. The plateauing in real yields has taken pressure off of gold, which struggled in the post-election euphoria …

2) Political Uncertainty Has Rises
“Although market volatility has remained muted, albeit less so the past week, policy uncertainty has risen post –election. This is important. Using the past 20 years of monthly data, policy uncertainty, as measured by the U.S. Economic Policy Uncertainty Index, has had a more statistically significant relationship with gold prices than financial market volatility. In fact, even after accounting for market volatility, policy uncertainty tends to drive gold prices …

“Going forward, gold’s performance may be most closely linked with what happens in D.C. Absent fiscal stimulus, the U.S. economy appears to be in a state of equilibrium: modest but stable growth. In this environment, gold should continue to be supported by historically low real rates and continued political uncertainty. Alternatively, if Congress does manage to enact a tax cut or other stimulus, we are likely to see some, albeit temporary, reassessment of growth and a corresponding backup in real rates, a scenario almost certainly negative for gold..’” (“Gold Shines As Washington Stumbles.” Market Insider 8.27.17)

Gold Hits 10-Mth High; These Are 3 Key Drivers - Analysts
Kitco reports three (3) driving factor on why gold is underpinning the market right now.

“I would say it’s the low-yield environment, the trend of the dollar and strong growth in emerging markets [driving gold] “Jens Nordivd, founder of New York-based Exante Data, told CNBC last week …

“The green back kicked off the trading week on a weaker tone, which often trades inversely to the yellow metal. While gold pushed through $1,300 an ounce Monday, the U.S. dollar index moved to multi-month lows, last at 92.19. December Comex gold last traded at $1,315.80, up 1.38% on the day …

“As Kitco’s senior market analyst Jim pointed out, it was rally the U.S. dollar’s weakness that drove gold’s move higher on Monday. ‘A slumping U.S. dollar index that hit a 15-month low today worked in favor of the precious metals market bulls,” he said …

“But, the other two factors Nordvid highlighted are also currently working in gold’s favor. Low yields lowers the opportunity cost of holding gold, while growth in emerging markets helps dive demand for the metal …

“Uncertainty in Washington is driving safe-haven gold as well … (“Gold Hits 10-Mth High; These Are 3 Key Drives - Analysts.” Kitco 8.28.17)

Grant Williams: “History Is About To Repeat Itself Again…And It Might Get Ugly” – Market Slant
Grant Williams, Co-found of Real Vision TV, believes that the 76 million retiring Baby Boomer will trigger a major pension crisis.

“With the potentially bad situation we could face, holding physical metal, somewhere safe, somewhere outside the banking system, is just a sensible precaution to take …

“His outlook has changed drastically since he started his first job trading Japanese markets in 1986: During this heyday, precious metals weren’t on his radar at all – until a year later, when he witnessed his first stock market crash and started asking some inconvenient questions …

“Until then, the gold price didn’t mean much to him, except as an indicator of other things, so he considers the crashes he witnessed in his career wake-up calls and blessing in disguise …

“Williams says gold is still undervalued: ‘At heart, I’m a value investor, and I thing gold offers incredible value now.’” (“Grant Williams: “History Is About To Repeat Itself Again…And It Might Get Ugly.” Market Slant 8.28.17)