Gold prices are back to trading flat this morning after climbing above the key $1,300 per troy ounce mark on Thursday thanks to President Donald Trump and his decision to cancel a historic meeting with the North Korean leader Kim Jong-un which was due to take place on June 12.
Prices are now treading water as despite the rise the gold price didn’t go above the technically important 200-day moving average at $1,307/oz, according to Commerzbank Research. The Trump/North Korea friction is causing an influx into gold as a safe haven as it rekindles issues over North Korea’s nuclear arsenal in addition to what is already happening in the Middle East where Trump has decided to revoke the nuclear agreement with Iran.
“Amid yesterday’s events, gold in euros climbed to an eight-month high of around €1,115/oz. Presumably most of the gold was bought via the futures market, as gold ETFs actually registered slight outflows yesterday,” said Commerzbank.
Strong stock markets in Asia and the US and the FTSE flirting with record highs are working against gold as investors continue to flock into shares.
Outflow from gold ETFs has so far totalled a good eight tonnes this week. Silver was pulled up by gold and made disproportionate gains, resulting in the gold/silver ratio declining again.
Crude oil prices falling as market stays in correction mode
Oil prices have been in correction mode since mid-week. Brent is falling for the second day in a row and is trading this morning below $78 per barrel. WTI is down for the fourth day running and has dropped to a good $70 per barrel. Prices have shed roughly $2.5 compared with their previous highs.
One key reason for the latest price weakness is the debate – sparked two days ago – about a possible increase in oil production at OPEC’s next meeting in under a month’s time. Russian Energy Minister Alexander Novak also spoke out in favour of a gradual increase in output. For this to happen, those OPEC and non-OPEC countries participating in the production cuts would have to see a balanced oil market in June.
According to Commerzbank, judging by stock levels and market balance the oil market is actually undersupplied which would provide the oil cartel with a justification to step up production. This, in turn, will pave the way for falling oil prices.
President Trump’s cancellation of the planned meeting with North Korea also points in this direction, as oil demand could suffer if the North Korean conflict flares up. After all, three of the world’s five largest oil import countries are to be found in the region: China, Japan and South Korea.