The price of gold is influenced by two main drivers. The perceived and actually level of U.S. interest rates, and the temperature of geo-political tension in the world at any one time. World markets have been delivering both in abundance in the last few days. Firstly the U.S. PPI missed badly to the downside taking even more heat out of inflationary expectations and no doubt causing tears amongst the FOMC as the put the safety back on the rate hike gun and put it back up on the wall.
The escalating ICBM-led saber rattling between the U.S. and North Korea overnight saw a rush to the safe havens of U.S. bonds and equities tanking; price action straight out of the risk aversion playbook.
Falling bond yields and and safe haven flows were also undiluted liquid fertilizer for gold as well, having climbed $27 dollars in two days to trade near 1285.60 in Asia this morning. It is reasonable to expect now that as long as the heat stays on around the Korean peninsula any dips in gold will be eagerly met by buyers.
Gold has some intra-day resistance at 1289.00 this morning but the key level is the longer term 1295.50/1296.00 just ten dollars away. This triple top is the gateway to a move above 1300.00 and from a technical perspective, we need a daily close above the former to set that stage.
Traders should closely watch global equities today, with further falls and risk aversion likely pumping more safe haven flows into precious metals. In that same vain, it would obviously be wise to keep an eye on North Korean headlines as they will be the main directional driver of gold prices in the coming days.