Gold prices climbed to two-month highs on Friday as investors sought refuge from escalating tensions between North Korea and the United States, while bullion also received support from weak U.S. inflation data.
U.S. President Donald Trump issued a new threat to North Korea, saying American weapons were “locked and loaded” as Pyongyang accused him of driving the Korean Peninsula to the brink of nuclear war.
For the week, December gold gained $29.40 to close just shy of 1300 at 1294.0. Front month September silver gained 37 cents for the week to close at 17.07. Despite weak inflation numbers which included a tepid reading on CPI this morning which was friendly for metals and weak for the dollar, the market remained focused on the geopolitical drama. Saber rattling between both governments spurred investment into traditional safe havens ahead of this weekend as gold and silver rallied amid the uncertainties.
While I personally do not believe there will be a war erupting between North Korea and the United States, the strong language from the President especially Thursday and Friday did nothing to dispel any conclusions on how this might end. While equities lost big on Thursday, they recovered somewhat on Friday off of their worst levels for the week. Technically, gold today flirted with making a new high for 2017 at 1298.8, but missed the yearly high by 70 cents. Traders in my view should dismiss any significance by trading at or just above 1300.0 an ounce as that level has no technical value. Major resistance sits at the yearly R1 at 1332. If that level is taken out look for the market to test near the 2016 highs just above 1360. Should any significant pullbacks occur, the market could test all the way down to where the 50 and 100 day moving averages sit in the mid 1250 area.
Since bottoming at 1204 in early July, gold has rallied over 90 dollars in just over a month. In my view there have been three things sustaining this rally.
First, a weaker dollar due to a dovish Federal Reserve has buoyed and spurred metals and energies higher as an anti dollar investment.
Second, seasonal buying along with a surge in physical buying out of Asia as precious metals often rally ahead of Indian wedding season in mid July through Labor Day weekend.
Third, has been the geopolitical chaos in not only Washington but around the globe that has ignited the speculative crowd back into the metals sector.
Watch the charts for direction and obviously the N. Korean situation over the weekend. My swing numbers come in next week as follows for December gold and September silver. For December gold, support sits down at 1283 and then down at 1268.0. A close under 1268 takes the market down to the 100 and 200 day moving averages at 1254-55. Resistance sits up at 1309, and with a close over 1324 and then potentially 1332. For September silver, support sits down at 16.80 and then 16.36. Resistance is up at 17.51 and then up at 17.95.