Gold: Prices Rise on Weak USD & Increased Geopolitical Tensions

Precious metals shot up in price this week benefiting from US Dollar weakness as concerns grow over a potential US tax overhaul with reports that an important corporate tax cut could be delayed by another year.  The US Dollar has been stronger over recent weeks as investors had anticipated an economic boost being provided proposed US tax cuts. News of the delay consequently weighed on the US Dollar as investors have covered some recent longs.

Gold has also been supported this week by news of further geopolitical tensions. While the focus has been on North Korea over much of the year, the situation in the Middle East has deteriorated recently as Saudi Arabia has launched a crackdown on corrupt officials and princes.The market has also responded to news of a rocket attack on the Saudi capital of Riyadh, fired from Yemen, has Saudi Arabia continues to wage war on Iran-backed rebels in Yemen.

Despite the recent uptick, the latest industry data shows that global demand for gold over 3Q was down 9% year over year according to the World Gold Council. The decline is said to be fueled by two main factors: weakness in the jewelry sector and lower inflows in gold ETFs.

Gold prices have turned higher this week moving off the local structural support around 1260.58, in line with the bullish channel which has framed price action since the November 2016 lows, and is now fast approaching the next key resistance at 1295.79 which has been a pivotal level over the year, providing strong resistance over the summer. A break back above that level will put the focus on the rise back to the 2017 high and bullish channel top.

Silver: Prices Remain Stagnant

Silver prices also rose this week as a weaker US Dollar underpinned the metal which has been somewhat stagnant over recent weeks. Fluctuations in the geopolitical environment, as well as expectations around the Fed’s December rate hike, continue to be the main drivers of silver.