Gold shone brightly on Monday as a renewed focus on geopolitical risks stoked demand for safe-haven assets.
Fresh concerns over North Korea’s nuclear program has accelerated the flight to safety, consequently sending Gold to a weekly high above $1285 during early trading. While short-term bulls may exploit the current uncertainty and geopolitical jitters to drive prices higher, the upside is likely to be limited by a strengthening Dollar. With expectations mounting over the Federal Reserve raising US interest rates in December, the zero-yielding metal remains at risk of reversing its gains.
Technical traders will be paying very close attention to how prices react above the $1280 resistance level. A technical bounce seems to be in play, with bears still in firm control below the psychological $1300 level. Sustained weakness back below $1280, should forge a path back towards $1267. In an alternative scenario, a daily close above this level may encourage a further incline towards $1290.
Turkish Lira nosedives against Dollar
The Turkish Lira was under intense selling pressure during early trading on Monday following an escalation of diplomatic tensions between Turkey and the United States. A mutual suspension for visa services for non-immigrants remains the key culprit behind the Lira’s startling 6.6% depreciation against the Dollar. Although the Lira has clawed back recent losses since the sharp depreciation, increased political tensions may continue to impact the Turkish currency this week.
Currency spotlight – GBP/USD
Sterling staged an aggressive rebound on Monday, as investors warmly received Theresa May’s promises to fend off challenges to her leadership.
While the current optimism may fuel the Pound’s appreciation in the short term, political risks at home and Brexit uncertainty, are likely to limit upside gains. With round five of the Brexit talks beginning today in Brussels and no clear plan on how the UK will break away from the EU, Sterling remains vulnerable to downside risks. It could get very messy for Sterling this quarter, especially if the ongoing Brexit drama and soft economic fundamentals, prevent the Bank of England from raising UK interest in November.
From a technical standpoint, the GBP/USD has broken back above 1.3150 on Monday. A daily close above this level may signal the start of a technical bounce, with 1.3230 being the next level of interest. Alternatively, sustained weakness below 1.3150 may open a path back towards 1.3050.
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