The Week Ahead In Gold

/0 Comments/in , /by

The gold market is seeing some sideways trade as the market consolidates near recent highs. The gold market has essentially regained all of the ground lost in the aftermath of the Trump election victory, and appears to be headed even higher from current levels.

 

The yellow metal currently has a number of issues working in its favor, and without question this weekend’s general election in France is going to be watched closely by global markets.

 

In what some are calling the most unpredictable election in decades, some polls are suggesting that far-Right leader Marine Le Pen and independent centrist Emmanuel Macron were in the lead. Voter turnout has been higher than expected, and France has mobilized a significant police force to help secure polling stations.

 

This first round of elections comes just days after another terrorist attack in France that left a police officer dead. France has been victimized by numerous terrorist attacks in recent years, and the results of this key election could potentially have far-reaching effects on the country’s immigration and other policies.

 

Ms. Le Pen, for example, has taken an aggressive stance on France’s borders and its membership within the European Union. This election, as well as others coming up, could literally determine the facet of the EU as it exists today.

 

Investors are also paying close attention to any further developments regarding North Korea. Recent saber-rattling by the nation has put the U.S. on high alert, and the country thus far has not backed down despite the threat of U.S. military action.

 

For right now, the U.S. may depend on China to attempt to exert pressure on North Korea. Should this fail, however, it appears clear that the U.S. is ready to take unilateral action against the nation.

 

The threat of nuclear war does not appear to have been this high since the cold war, and the ongoing conflict may potentially keep investors on their toes while being supportive of perceived safe haven assets such as gold and other metals.

 

This week will be a busy one from a data standpoint, with investors getting the latest readings on Durable Goods Orders, GDP, PMI, Weekly Jobless Claims, Consumer Confidence and more. There will also be several Fed officials speaking at various engagements today.

 

The Federal Reserve has taken a decidedly more dovish tone in some recent commentary, and while the central bank may still hike again in June, there is the possibility that the bank decides to hold off.

 

The central bank recently stuck with its forecast for a total of three rate hikes this year, but some key issues could potentially keep the Fed at bay.

 

A significant escalation with North Korea, for example, could potentially rattle global financial markets. Further suggestions of an eventual European Union breakup could do the same.

 

The rally in stocks and risk assets in recent months has been built on the idea of major policy changes by the Trump administration which have thus far not been implemented. If it becomes clear that major tax reforms or a massive fiscal spending package are not likely to be implemented, much of the recent rally could be undone quickly.

 

Either way, the pace and timing of any additional hikes is likely to remain slow and incremental, and this scenario is supportive for gold. 

The Week Ahead In Gold

/0 Comments/in , /by

The geopolitical world has certainly seen some changes since Donald Trump took office in January. Although the vast majority of discussions have been centered on Russia and China, recent headlines would seem to suggest that North Korea currently poses the biggest threat to U.S. national security.

 

The last several weeks have seen the U.S. launch a military strike against a Syrian airfield in retaliation for a chemical weapons attack that killed numerous innocent civilians. Although there has been some debate about the tomahawk missile strikes ordered by President Trump last week, many have also applauded the fact that action was taken.

 

The strike against Syria has fueled tension between the U.S. and Russia.

 

North Korea has seemingly continued in its pursuit of a nuclear weapon, and recent actions appear have been in direct defiance of the U.S. and its allies.

 

The parade in North Korea this past week was called a celebration, but also seemed to be an excuse for the country to showcase some of its arsenal. Unfortunately for the U.S., the North Korean arsenal that was on display appeared to be far more advanced than military and intelligence officials previously thought, adding to rising concerns over the nation’s capabilities.

 

On Sunday, the country attempted another missile test that failed according to U.S. and South Korean defense officials. Recent reports said the type of missile that was being tested has not yet been determined.

 

This failed test is being seen as another provocation in a series that could eventually lead to military action.

 

There are discussions already being had about a U.S. offensive to take out North Korea’s nuclear program, and unfortunately such a scenario could be getting closer than many of the public assume.

 

For right now, the U.S. is hoping that China will assist by exerting its influence. What steps China may be willing to take, however, remains unclear.

 

This issue is just one of several that could keep the gold market well-supported in the near term.

 

Also bullish for gold is the notion that the Federal Reserve may have to keep further rate hikes on hold. Recent jobs data was disappointing, and other economic indicators are also showing some signs of lackluster activity.

 

The bigger story could potentially be concerns over the Trump administration’s ability to pass its highly-touted tax reform and fiscal spending plans. The recent failure to repeal the Affordable Care Act has likely fanned those fears further, and if the administration is unable to move forward on these key issues markets could be setting up for a major downside reversal.

 

Such a scenario could also fuel selling in the dollar index, which would likely add to the yellow metal’s allure.

 

The gold market appears poised for further gains as its technical posture has improved significantly and as the geopolitical situation has become much more serious. Geopolitics will likely be the main driver of gold prices in the near-term, however, any data disappointments or dovish rhetoric from the Fed could also be supportive for the yellow metal. 

The Week Ahead In Gold

/0 Comments/in , /by

In some ways, the world looks very different than it did just a week ago. Last week, another chemical weapons attack in Syria took the lives of innocent citizens, and the effects of the atrocity were broadcast all over the internet.

 

This time, however, the attack did not go unanswered.

 

On Thursday evening, U.S. President Donald Trump authorized a tomahawk missile strike that intended to send a strong message to Syrian leader Bashar al-Assad.

 

Whether or not the strikes will prove effective for that purpose remains unclear.

 

The amount of actual damage done was questioned on Friday, as reports of Syria using the airfield to launch planes was reported. Either way, the situation has created a good deal of uncertainty that had a significant impact on markets Thursday evening.

 

Following the U.S. military action, stock index futures sank while gold and bonds saw heavy buying.

 

The immediate reaction proved fleeting, however, as calmer heads prevailed on Friday and as the risk aversion mindset largely faded.

 

The reversal of markets on Friday was especially curious given the absolute dud of an Employment Situation Report. The U.S. Department of Labor and Statistics reported the country added just 98,000 jobs last month. Consensus estimates were looking for an addition of 175,000 jobs. The much lower than expected figure was also particularly interesting given the upbeat ADP employment report earlier in the week.

 

Investors will take a very keen interest in the next jobs report for April to be released the first week in May. Another major miss like that seen on Friday could potentially keep the Fed on hold and build upon some recently increasing dovish sentiment.

 

For now, the central bank will likely stick with its forecast for two additional hikes this year. Fed funds futures contracts are pricing in a very strong likelihood of another hike coming in June.

 

The gold market appears to have a number of things going for it currently that could potentially continue to propel prices higher in the coming weeks and months. The Trump administration and geopolitics will play a major role in price action not only in the metals markets but numerous financial markets.

If the situation with Syria escalates further, the flight to safety trade may be back on. The U.S. also may have to contend with strained relations with Russia over the conflict. Any signs of saber rattling or aggression by Syria or Russia could fuel a flight to safety, and could weigh heavily on risk assets.

 

As if these issues are not enough, North Korea is considered by some to be the biggest current threat to U.S. security. The unpredictable behavior by North Korean leadership along with the country’s nuclear aspirations could potentially prove to be a powder keg of geopolitical tension and conflict.

 

Geopolitics aside, investors will also continue to take a wait-and-see approach regarding the Trump administration. The recent failure of the administration to repeal the Affordable Care Act is likely fueling some serious doubts about its ability to pass other key pieces of legislation such as tax reform and fiscal spending.

 

All of these factors, along with the possibility of a more dovish Fed, could keep the gold market on the offensive in the near-term and any significant dips are likely to be seen as a good buying opportunity. 

The Week Ahead In Gold

/0 Comments/in , /by

Both the stock market and the gold market had a strong first quarter to begin the New Year. As we get deeper and deeper into the Trump Presidency, however, things may not look quite as rosy as they did a few short weeks ago.

 

It’s no secret that the rally in equities and risk assets over the last several months has been built on the notion of major tax reforms and massive fiscal spending. The promise of returning manufacturing jobs to the U.S. and looking to improve trade deficits has also been a factor in the stock market’s ascent.

 

That ascent in equities has potentially run its course, however. There are numerous economic and geopolitical issues on the horizon that could potentially lead to a significant shift in investor sentiment and a corresponding spike in market volatility.

 

Although there are numerous things that have the potential to fuel volatility and make investors anxious, here are a few of the major ones that could potentially shake global financial markets and fuel demand for safe haven assets such as gold and other metals:

 

Trump’s tax reforms may not see the light of day: The Trump administration’s tax cuts are already running into a wall of resistance. Massive tax cuts combined with a significant boost in defense and fiscal spending leads to higher deficits. After the Trump administration was not able to put together a vote to repeal the Affordable care Act, investors may begin to doubt its ability to pass other key pieces of legislation. Markets have moved sharply higher on the idea of tax cuts and more spending, and if this does not come to fruition they will have to adjust which could lead to volatility and sharply lower stock prices.

 

Here comes the debt ceiling again: The continuing resolution that prevented a government shutdown is set to expire at the end of April. The debt ceiling could potentially become a major source of partisan bickering. The idea of an agreement not being reached and the first ever U.S. default could potentially send shockwaves through global financial markets. If the debt ceiling is raised, the nation is still adding to its already enormous debt load. Either way, the ceiling could fuel significant demand for gold and other perceived safe haven assets.

 

North Korean saber rattling: It is certainly no secret that tensions between the U.S. and North Korea have been on the rise. Ongoing provocations by the North Korean Government have not gone unnoticed, and the U.S. has said that it is willing to take unilateral action against the nation if necessary. As the country becomes more advanced in its nuclear capabilities, the issue becomes more and more urgent. The U.S. would undoubtedly prefer to have China’s support in any efforts against North Korea, and this week’s meeting between President Trump and Chinese leader Xi Jinping may be very significant.

 

All of these issues have the potential to be a major catalyst for market volatility and lower stock prices. They also have the potential to fuel what could be a major rally higher in gold and other perceived safe haven asset classes. The next few weeks could become very interesting, and could see a dramatic shift in investor sentiment.