Gold is showing impressive signs of strength in recent trade, and the yellow metal could potentially be in the beginning stages of a significant breakout. The gold market has been driven higher primarily by increasing overall risk aversion and a weaker U.S. dollar.
The situation with North Korea has actually taken a backseat in recent days, as last weekend’s violence in Charlottesville has been a main focus of both government and investors this past week. The rally by white supremacists was the largest of its kind in some time, and unfortunately resulted in the deaths of two state police officers and a young woman who was protesting the rally.
The violence and hatred seen was disturbing, but the Trump administration’s response also ruffled a lot of feathers to say the least. Trump’s response that there was fault on both sides elicited responses from many in the GOP, as well as democrats and even other world leaders. Although Trump responded again two days after the rally, many seemed to feel that it was too little too late. Trump then, however, made comments from Trump Tower in New York at a press conference, once again seemingly blaming both sides involved.
The response to Trump’s press conference has been widespread and harsh. It seems that even his closest advisors don’t know what to say about him anymore, and hopes for his new Chief of Staff being able to bring more order to the administration may be fading.
The recent actions and commentary from Trump have reportedly fueled even more disorder in the White House, and investors are taking notice.
In recent days, Trump fired his chief strategist Steve Bannon, who was recently quoted by the Washington Post as saying “No administration in history has been so divided among itself about the direction about where it should go.”
The current state of the administration has people concerned, and really questioning whether or not any of Trump’s agenda will be able to be implemented.
The recent terrorist attack in Barcelona may also be fueling some degree of risk aversion, and the current state of geopolitics may keep a floor under gold and perceived safe havens for the time being.
Stocks may be a major catalyst for sharply higher gold in the coming weeks and months. Stocks have begun to show some significant signs of a major top, and a major sell-off could be in the making. Should equities begin to really falter, a significant amount of investment capital could be directed into gold and other hard assets.
Recent commentary from Fed officials would seem to suggest that the era of low rates is far from over. As the Fed remains accommodating with regards to monetary policy, gold investors may see a green light to buy, even as the yellow metal extends the recent rally. The potential for ongoing low rates, a major reversal in stocks, a weaker dollar and heightened geopolitical tensions may all fuel further upside in gold and other hard assets.
The upcoming trading week may be critical for the gold bulls, who would like to see a solid close above the $1300 per ounce level.