In the previous edition of the Market Overview we wrote that “geopolitical risks clearly won with a hawkish Fed in a tug of war in the gold market” at the turn of March and April, as the yellow metal gained about 7 percent from mid-March to mid-April. However, the price of gold declined about 4.8 percent until May 9 when it started its rebound. As the chart below shows, at the beginning of July, the price of gold came close to the level of mid-April.

Chart 1: The price of gold from January 2016 to June 2017.

As one can see, the first round of the French presidential election was a clear turning point, as it became obvious that neither far-right Marine Le Pen nor far-left Jean-Luc Mélenchon would be elected. Hence, gold lost some of safe-haven bids, as investor appetites increased for risky assets. Does it mean that the yellow metal is doomed to oblivion?

On the one hand, it might seem so. You see, the geopolitical concerns definitely eased in the last month, as radical and anti-EU candidates did not win the French presidency, which reduced one of the biggest geopolitical risks for this year, i.e. the threat of further disintegration of the Eurozone.

Surely, the night remains dark and full of terrors. A snap general election in the UK is scheduled for June. In September, the German federal election is held. Brexit is still unfolding. There is a possibility of early elections in Italy. The leader of North Korea continues his nuclear frenzy (as well as hairstyle madness), launching ballistic missiles one after another. Russia continuously plots how to rebuild the USSR. And there is of course the unpredictable Donald Trump who just fired FBI Director James Comey, triggering political turmoil in Washington.

However, all these risks look much less frighteningly after a careful look. The currently ruling Tories are set to win in the upcoming British election: the more things change, the more they stay the same. The same applies to Merkel’s party in Germany, which has a 12-percentage point lead over its main rival. Moreover, its biggest competitor is the mainstream, pro-EU Social Democratic Party. So there are no threats for the Eurozone here. Even if the Five Star Movement triumphs in Italy in 2017 or 2018, it would have to win two referenda to withdraw the country from the EU. Yes, Putin is trying to take over the world, but it’s what he has long done. Nothing new here.