Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21
Why Tether USDT, Stable Scam Coins Could COLLAPSE the Crypto Markets - Black Swan 2021 - 6th Jun 21
Stock Market: 4 Tips for Investing in Gold - 6th Jun 21
Apple (AAPL) Summer Correction Stock Trend Analysis - 5th Jun 21
Stock Market Sentiment Speaks: I 'Believe' We Rally Into A June Swoon - 5th Jun 21
Stock Market Russell 2000 After Reaching A Trend Channel High Flags Out - 5th Jun 21
Money Is Cheap, Own Gold - 5th Jun 21
Bitcoin and Ravencoin Cryptos CRASH Bear Market Buying Levels Price Targets - 4th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

How Far Is it from North Korea to Italy?

Commodities / Gold and Silver 2018 May 30, 2018 - 05:22 PM GMT

By: Arkadiusz_Sieron

Commodities

Almost 5500 miles ( 8,800 kilometers ) . That’s the distance between Pyongyang and Rome. It seems a lot, right? But not for gold, the truly global monetary asset. In recent days, the price of the yellow metal has immediately reacted to the developments around both North Korea and Italy. What has happened?


Love Is a Battlefield
As Pat Benatar beautifully sang, love is a battlefield. The same applies to the gold market. The chart below shows the price of gold in 2018. As one can see, the price of the yellow metal dived on May the 15th below $1,300… just to rebound several days later.

Chart 1: Gold prices in 2018 (London P.M. Fix, in $).


What happened? Well, gold plunged because of the rebound in the greenback. The U.S. dollar strengthened partially (aside the Eurozone’s problems and rising yields on American Treasuries) because of the eased conflict over the Korean Peninsula. President Trump was supposed to meet with the North Korean leader Kim Jong Un in June. But Trump pulled out of the June the 12th summit on Thursday, sending gold prices again above $1,300. Diplomatic negotiations are a battlefield. However, as the chart below shows, the jump was temporary and the price of gold has gradually fallen since Friday. As we constantly repeated, geopolitical factors in general, and threats from the North Korea in particular, have only short-lived and limited impact on the gold prices.

Chart 2: Gold prices (London P.M. Fix, in $) from May 25 and May 28.


Good Morning Italy with Your Elections
Fast teleportation to Italy with the spaghetti al dente, strong coffee, and political instability. On Monday, Italy’s President Sergio Mattarella nominated Carlo Cottarelli, a former International Monetary Fund official, as interim prime minister with the goal to pass the next budget and to plan snap elections in the autumn or early next year. The decision to appoint Cottarelli, was a surprising move, as it means a conflict with the anti-establishment forces which gained the majority of votes in March elections. President Mattarella vetoed the 5-Star Movement and League’s choice of a euro-sceptic Paolo Savona as economy minister, because he had threatened to pull Italy out of the Eurozone. He explains this move, saying:

The uncertainty over our position has alarmed investors and savers both in Italy and abroad. Membership of the euro is a fundamental choice. If we want to discuss it, then we should do so in a serious fashion.

Hence, President clearly wanted to calm financial markets. But it might be a bear’s favor. You see, snap elections may lead to an even stronger mandate for the country’s populist parties. The President’s decision might be interpreted as desperate and disrespectful for popular vote establishment’s maneuver to remain in power. It is grist for the populist’s mill. Hence, the euro declined again the U.S. dollar, as investors are afraid that anti-euro forces will strengthen in Italy.

And more weakness might come. The Italy’s snap election in autumn could create a problem to ECB which considers to start winding down its quantitative easing program by September. If the central bank postpones the reduction of its monetary accommodation, the U.S. is likely to strengthen further, putting the yellow metal under downward pressure.

Implications for Gold
As we have argued in our Gold News Monitor and Market Overview for a long time, gold behaves like a currency. But it’s not a typical currency, as it is not linked to any particular country or economy. Gold is a real international monetary asset, the ultimate safe haven against global turmoil. Indeed, on Thursday, its price jumped in reaction to Trump’s cancellation of the meeting with Kim Jong Un.

But it started to decline soon after, partially to the revived hopes that the U.S. President would eventually meet with the North Korean leader (investors should always remember about Trump’s unique negotiation and communication style). But the gold prices reacted also to the developments in the Old Continent, i.e. to concerns about the snap election in Italy. Adding to these worries was news that Spanish Prime Minister Mariano Rajoy would face a vote of confidence on Friday (as dozens of people linked to the ruling center-right People’s Party were convicted of corruption). Another potential hit for the euro. In consequence, Italian and Spanish borrowing costs relative to Germany’s increased substantially. So the U.S. dollar bulls should have a good time for a while. But we cannot say the same about gold bulls, at least in the near future. Investors should also remember that the Volcker rule might be soften soon, which should support the financial sector, reducing additionally the safe-haven appeal of gold. Stay tuned!

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in