Investors flee to safe havens
Gold posted an impressive performance in the last trading week, making great strides toward its two-month high of $1,296/oz. Beginning from an opening price of $1,259/oz., the metal was able to post daily gains. Thus, in light of growing political tensions surrounding North Korea, it has managed to convincingly underscore its reputation as a safe haven. Most of all, it was the promise by US president Trump of retaliation ”with fire and fury like the world has never seen” to threats from North Korea that brought about an increase in the price of gold. The futures markets also showed clear movement on this latest step in escalation. At 148,837 contracts, COMEX net long futures positions reached their highest level in 6 weeks. If the short covering continues, this could further boost the price of gold.
As a result of lower-than-expected US inflation figures on Friday afternoon, we remain bullish and anticipate that gold will approach the psychological threshold of $1,300/oz. We see technical support at $1,274/oz. (76.4% Fibonacci level) for the coming trading week. At the end of August, the ‘Jackson Hole Economic Symposium’ could capture investors’ attention as a turning point due to potential new interest rate signals expected from the FED and ECB.