The squabble between Pyongyang and Donald Trump raised demand for reliable assets and allowed gold to quickly recover losses incurred after the publication of statistics on the US labor market for July. TD Securities did not particularly believe that the growth of non-farm payrolls by 209 thousand could lower the price of XAU / USD below $ 1,250 an ounce, arguing that the Fed's sluggishness and geopolitical risks around North Korea will allow precious metals to stay afloat. The company watched as the water: the preparation of a miniature nuclear warhead built into a rocket, and the response of the US president in the style of "fire and sword," followed by Pyongyang's threat of an attack on Guam forced investors to seek refuge.
Gold looked with caution at the upcoming releases on US inflation and chewed information on the growth of Indian imports to 53.4 tons in June compared to 22 tons a year earlier. Since the beginning of the year, the supplies of precious metal to this country have jumped by more than 2.5 times compared to the same period in 2016. The figure has risen to 625.5 tons. Moreover, the second half of this year is most likely not so fruitful. The World Gold Council predicts that in 2017, domestic demand for metal will be 650-750 tons.
As for inflation, expectations of its acceleration, at first glance, could support the bulls for XAU / USD, because gold is traditionally considered an instrument of protection against price increases. In fact, investors fear that the nominal yield of US treasury bonds will rise faster than CPI, which will lead to an increase in real rates of the debt market. Given the existing correlations, this factor is negative for precious metals.
Dynamics of gold and real yield of US bonds
Source: Bloomberg.
The escalation of the geopolitical conflict on the Korean peninsula has become a real revelation for the markets. Tension immediately tried to smooth. Secretary of State Rex Tillerson said that the American people have nothing to fear, but Pyongyang misunderstood the diplomatic language of Trump. The president only said he was ready to defend the United States and its allies. At the same time, Beijing called for calm and negotiation.
It should be borne in mind that outbreaks of geopolitical tensions that do not end in wars are, as a rule, short-term growth factors for certain assets. If the conflict can be quickly repaid, then gold will have little chance to return to the psychologically important mark of $ 1300 per ounce against the background of growing risks of raising the federal funds rate and the potential correction of the USD index associated with them. Dragmetal is unlikely to fail deeply and most likely will give preference to medium-term consolidation.
Technically, the failure of the "bears" for XAU / USD to storm the support at $ 1248-1253 per ounce testifies to their weakness. To restore the uptrend "bulls" it is necessary to update the August maximum at $ 1275 and gain a foothold above this mark.
Gold, daily chart
