Gold Rally Continues as North Korean Jitters Dampen Risk Appetite

Gold prices continue to rise on Monday, after recording gains over the previous two days. In the North American session, gold is trading at $1334.12, up 0.70% on the day. There are no US indicators on the schedule, as  US banks are closed for the Labor Day holiday.

Gold continues to impress, as the metal padded gains of 2.5% last week. Gold is currently trading at its highest level since November 2016. Much of the gains can be attributed to tensions in the Korean peninsula, as nervous investors have flocked to the safe-haven asset. Over the weekend, North Korea announced that it had exploded a hydrogen bomb which could be fitted to an intercontinental ballistic missile. Although the claim has yet to be verified by Western analysts, it is clear that this nuclear device test has again raised tensions between North Korea and the US, Japan and South Korea. Predictably, US President Trump strongly condemned the North Korean action and has not ruled out a military response. With investors showing less appetite for risk, gold continues to benefit from the Korean crisis. If tensions continue to rise between Washington and Pyongyang, traders can expect the gold rally to continue.

US employment numbers were weaker than expected on Friday, and gold responded with slight gains. Nonfarm employment change slowed to 156 thousand, well below the estimate of 180 thousand. This marked a 3-month low. However, with the US labor market still close to capacity (the unemployment rate is just 4.4%), the markets can be forgiving about a softer nonfarm payroll report. Wage growth, or the lack of it, is a more pressing concern. Average Hourly Earnings posted a small gain of 0.1%, missing the estimate of 0.2%. This was down from 0.3% in the previous report, and matched the weakest gain seen in 2017. The lack of wage gains has impacted on inflation levels, which remain well below the Fed’s inflation target of 2%. Soft inflation has dampened enthusiasm for a final rate hike in 2017, with the odds of December increase pegged at just 37%.

Gold Nears 12-Month High on North Korea Concerns

Risk Aversion Spreads After Latest Missile Test

 

XAU/USD Fundamentals

Monday (Sep. 4)

  • There are no US events on the schedule

XAU/USD for Monday, September 4, 2017

XAU/USD September 4 at 12:15 EST

Open: 1324.88 High: 1340.04 Low: 1324.88 Close: 1334.12

 

XAU/USD Technical

S3 S2 S1 R1 R2 R3
1260 1285 1307 1337 1367 1392
  • XAU/USD posted gains in the Asian session. The pair recorded small gains in the European session but then retracted. XAU/USD has been flat in North American trade
  • 1307 is providing support
  • 1337 was tested earlier in resistance and is a weak line
  • Current range: 1307 to 1337

Further levels in both directions:

  • Below: 1307, 1285, 1260 and 1232
  • Above: 1337, 1367 and 1392

OANDA’s Open Positions Ratio

XAU/USD ratio is showing little movement in the Monday session. Currently, short and long positions are evenly split, indicative of a lack of trader bias as to what direction XAU/USD will take next. 

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.