The yellow metal has exploded higher over the last 12 hours as a combination of factors joined forces to fuel a surge in demand.
Firstly, there is increased uncertainty within the U.K. political landscape. Three members of the ruling Conservative party defected and joined a new group formed just this week.
The Independent Group, initially created by a breakaway group of seven Labour MPs, is the most significant mainstream political split in the U.K. since the 1980s. This has intensified uncertainty ahead of the March 29 Brexit deadline.
However, the biggest driver of safe-haven inflow for gold has been the news of Russian president Putin’s new threat to the U.S. In an address to the nation this week, the Russian leader announced that new missiles could be deployed to Europe. He stated that missiles capable of reaching the U.S. would be aimed there, should the U.S. deploy any new missiles to Europe.
U.S. Abandons Cold War Treaty
This latest verbal warning comes after the U.S. recently abandoned the 1987 Intermediate-Range Nuclear Forces Treaty, allowing the country to build new weaponry.
The news was a massive blow to the peace between the two nations following the end of the cold war. Indeed, many commentators and analysts have said that the US abandoning the treaty has effectively started a new arms race.
In his address, Putin explained that any such move by the U.S. would be considered a “serious threat” by Russia. He stated:
“I’m saying this clearly and openly, Russia will be forced to deploy weapons that can be used… against the decision-making centers that are behind the missile systems which threaten us… The capability of such weapons, including the time to reach those centers, will be equivalent to the threats against Russia.”
Putin Says Missile Tests Have Been Successful
Despite the warning, Putin explained that his nation would still rather keep a peaceful, amicable relationship with the west saying:
“We don’t want confrontation, particularly with such a global power as the U.S.”
However, he was also quick to update the nation on the progress made on an array of new arms systems. These include the successful testing of intercontinental ballistic missiles and a nuclear-powered cruise missile. There’s also an underwater nuclear-powered drone which will be deployed to a submarine carrier later this year.
NATO was quick to slam Putin’s “unacceptable” threats, saying:
“Russian statements threatening to target Allies are unacceptable. We call on Russia to focus on returning to compliance with the Intermediate-Range Nuclear Forces Treaty.”
The NATO response also said:
“NATO is a defensive alliance, which stands ready to defend all members against any threat. We do not want a new arms race, and allies have repeatedly called on Russia to verifiably destroy its intermediate-range missiles.”
The rally in gold has seen the price breaking above local structural resistance at the 1325.96 level. The price is now fast approaching a test of key structural resistance at the 1359.24 -1376.09, where we have a raft of swing highs posted over the last four years.
This is a major long term zone for gold. If the price can break above this level, this could signal a major regime shift in gold trading. It would also break the stagnation of the last six years and signal a potential return to the bullish run seen over the early 2000s.
Add a Comment
Are you sure you want to block %USER_NAME%?
By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.
%USER_NAME% was successfully added to your Block List
Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.