North Korea Makes Gold And Silver Fly, But Beware The RSI.

A thermonuclear North Korea has traders buying precious metals this morning, but be cautious of overbought RSI’s.

Gold gapped higher this morning as North Korea’s hydrogen bomb test yesterday, and heightened rhetoric from the U.S. saw traders rushing for safe havens. Having closed in New York at 1324.00, gold has rushed to a high of 1339.00 before subsiding to a still impressive 1334.00 in early trading. Friday’s price action was constructive anyway following a less than impressive Non-Farm Payrolls figure and a weaker dollar following the number. The only story in town this week though will be the ramping up in tensions on the Korean Peninsula with North Korea’s possible achievement of thermonuclear capability and aggressive rhetoric from the U.S. both a worrying escalation that comes in a very Central Bank rate announcement week.

GOLD

Gold’s technical picture is impressive having retraced and held its 1296.00 breakout level. This is now strong support and a key longer term pivot level. Gold flirts with its next key resistance at 1337.00 having peeked above it this morning. A close above is significant technically, opening up further gains to the 1375.00 highs last seen in July 2016.

We would caution though that the daily RSI is now in a solid overbought territory. This implies that although the technical picture remains strong, some consolidation may now be necessary for further meaningful gains to be made.

Gold Daily

SILVER

Silver closed just below its key resistance at 17.7600 on Friday and North Korea has ensured it has burst through that level this morning, touching 17.9000 in early trading.

Like Gold, the technical picture remains constructive as we trade at 17.8325 mid-Asia session. The charts are now clear of resistance until the April high around 18.6570, with support at 17.3900 and comfortably above its 100 and 200-day averages and trend line support on the chart below.

That said, Silver’s RSI is also approaching very overbought territory, implying that some consolidation may be required around these levels to catch its breath again.

Silver Daily

Geopolitical headlines will override technicals potentially and traders should be aware that Gold and Silver may move suddenly and unpredictably on them as the week progresses.

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.

Jeffrey Halley

Jeffrey Halley

Senior Market Analyst - Asia Pacific
With more than 30 years of FX experience – from spot/margin trading and NDFs through to currency options and futures – Jeffrey Halley is OANDA’s senior market analyst for Asia Pacific, responsible for providing timely and relevant macro analysis covering a wide range of asset classes. He has previously worked with leading institutions such as Saxo Capital Markets, DynexCorp Currency Portfolio Management, IG, IFX, Fimat Internationale Banque, HSBC and Barclays. A highly sought-after analyst, Jeffrey has appeared on a wide range of global news channels including Bloomberg, BBC, Reuters, CNBC, MSN, Sky TV, Channel News Asia as well as in leading print publications including the New York Times and The Wall Street Journal, among others. He was born in New Zealand and holds an MBA from the Cass Business School.
Jeffrey Halley