The gold market is seeing some strong upside on Thursday as geopolitical risks and the Fed both fuel buying. In a move that was far from a surprise, President Donald Trump has officially cancelled the upcoming summit with North Korean leader Kim Jong Un.
“I was very much looking forward to being there with you,” Trump said in the letter to the North Korean government. “Sadly, based on the tremendous anger and open hostility displayed in your most recent statement, I feel it is inappropriate, at this time, to have this long-planned meeting.”
The renewal of hostilities between the U.S. and North Korea is fueling some safe haven buying today, and that interest could continue if tensions begin to climb again.
Also potentially adding fuel to the fire is the ongoing trade negotiations between the U.S. and China. President Trump thus far has not appeared to be overly impressed with the ongoing talks, and any further escalation in tensions over trade could also keep a strong bid in the market.
On the domestic side of things, the latest FOMC meeting minutes showed the central bank is willing to allow inflation to overshoot its preferred 2% target. The central bank seems to be of the opinion that inflation is likely to run a bit hotter, but for a short period of time.
Despite this, market expectations for a fourth rate hike this year declined by several percentage points. The central bank’s comments were seen as being more on the dovish side of the ledger, and the central bank may be getting close to the point at which rates are neither restrictive nor overly expansionary.
Although the Fed’s commentary can be construed in different ways and analysts may have differing opinions, the central bank appears quite comfortable with the current pace of hikes and seems more than willing to let the economy overheat a bit after years of slow growth.
All of the issues outlined above could be considered bullish for gold, and the metal could see some key technical tests in the near-term.
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