The Gold price is on its way down and has reached its weakest level since the 10th of May. Selling pressures seem none-the-less to fade around $1220. The North Korean missile launched into Japanese waters yesterday barely boosted the precious metal for the time being. But it does not need much in our view for geopolitical issues to raise and drive higher the gold price.
Financial markets are still moving towards risk-on mode and are then moving away from the Gold safe haven. Signals sent by central banks are positive for markets. The Fed is normalising its monetary policy, the ECB may increase rates if the Eurozone recovery accelerates and last but not least, the European uncertainties are on the slide right now with only the German federal elections in September, the results of which should not be surprising.
However, we consider that it would need only a glitch to see investors back to Gold. Brexit negotiations promise to be tough, not every EU members have the same trade interest with the UK, and this will create divergence, plus markets are too optimistic about the US recovery while geopolitical risks (Middle East, North Korea) may rise at any moment.
By Yann Quelenn