Gold Rises Despite Fall In ETF Demand

August 11, 2017

Gold is on the move this week after saber-rattling by the U.S. and North Korea pushed the safe-haven metal back onto investors' radar.

President Trump said on Tuesday that threats by the Hermit Kingdom would be met by "fire and fury," which was followed up a day later by a North Korea threat to bomb the U.S. territory of Guam.

Despite rising geopolitical tensions, no one is ready to throw in the towel on stocks just yet—the S&P 500 closed nearly unchanged on Wednesday, even after North Korea's tough talk—but investors seem to be willing to add a bit of protection to their portfolios in the form of gold.

The yellow metal climbed to $1,285/oz as tensions rose this week, the best level in about two months, driving year-to-date gains to around 11.5%.

 

Spot Gold

 

No Breakout Yet

Though sporting solid gains for 2017, it doesn't yet look like gold is ready to run away to the upside or that investors are ready to fully embrace the metal. Earlier in the year, prices approached $1,300 on two separate occasions, but backed down each time.

Strong words between the U.S. and North Korea won't be enough to fuel a sustainable rally, as geopolitical catalysts tend to be short-lived. On the other hand, the dollar's surprise downtrend this year (the U.S. Dollar Index has fallen 8.5% year-to-date) may be a stronger catalyst to keep the rally going.

If the Dollar Index slides below 92 or 93, which is the bottom of the range from the past two years, perhaps that will be enough to send gold through $1,300.
 

 

 

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