(04 OCTOBER 2017)DAILY MARKET BRIEF 2:Gold tumbles as geopolitical risks fade

The yellow metal has reached its 8-week low and is trading around $1275 which nonetheless remains at a strong level if we compare gold prices since the start of the year. Gold price began the year below $1200. The return so far of the precious metal is still very interesting well above 6%.

Markets are now less focus on the potential geopolitical risks between the US and North Korea. Central banks are back to centre stage and anticipation of further tightening could pressure down the yellow metal. The strong equities markets (in particular the US market) has pushed up the dollar which resulted in some gold weakness.

Our view is that we definitely believe that markets are too optimistic regarding the ability of central banks to tighten their monetary policy. Debts are way too important and increasing the cost of the debt would create major markets turmoil. We then continue to consider that central banks will likely let inflation run in order to kill it. This will definitely result in a gold appreciation within the medium-term. We maintain our bullish view on gold and reload longs as we should hit new highs soon.

By Yann Quelenn