Precious Metals Reacts to North Korean Missile Test

The Market Gage - Dillon Gage's Precious Metals Newsletter

Hope everyone had a safe and fun 4th of July…now, down to business.

We spoke a little about global geopolitical strife late last week and guess what? It’s returned with a vengeance. As of yesterday, the 241st birthday of our nation, North Korea launched an intercontinental ballistic missile (ICBM), supposedly capable of striking the contiguous United States (in this case, Alaska). U.S. and South Korean forces immediately held a joint drill in response to such a provocation. And what happened in the precious metals market as a result? Gold prices edged up to just shy of $1,230 an ounce in response yesterday, but as of this morning, the yellow metal has settled down again to around $1,220, while silver has hit a six month low below $16. Asian markets are clearly spooked by the news and it may be anyone’s guess what happens next.

Some positive spin? How about the gold ETF market? FastMarkets Gold Weekly Reports states, “Even in a worst-case scenario (i.e., a negative swing in speculative sentiment toward gold), the downward pressure in gold prices may prove limited.” The report goes on to say, “Going forward, we suspect ETF investors will continue to accumulate gold at a slow pace in order to have diversified portfolios, but the pace of inflows may become stronger in case of a sudden wave of risk aversion, forcing some too-complacent investors to boost their exposure to safe-haven assets like gold.”

On the horizon is the June’s job report, ready to act as a “tell” on potential gold investment opportunities. Combined with the Fed’s recent policy decisions, this could be a real crystal ball for precious metals moving forward. According to some experts, the market may have a little to look forward to. Some are saying that the yellow metal may just do well in the last half of 2017. If, and only if, the latest round of Fed rate hikes turns out to be more of a bluff than a strategy.

Have a wonderful Wednesday…

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