The Week Ahead In Gold
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.