When Kim Jong-Un, the Supreme Leader of North Korea, pressed the button that detonated a hydrogen bomb last fortnight, gold traders around the world must have rejoiced, since gold usually does well during geopolitical turmoil. International gold prices reached an 11-month high of $1,335 last week.
But can we expect the rally to continue? Most experts don’t expect a big upward move from current levels. Here’s why.
There is no telling what will happen next in the ongoing tussle between US and North Korea. “If the crisis in the Korean peninsula continues, we might see international gold prices inching higher towards the $1,360 mark,” says Prathamesh Mallya, Chief Analyst, Non-Agri Commodities & Currencies, Angel Commodities Broking. This also means that prices could crash if fears of a military strike recede. “The geopolitical risk is already in the price. Gold will see an immediate correction if the Korean peninsula crisis ends,” says Lakshmi Iyer, Head of Fixed Income and Product, Kotak Mahindra Mutual Fund.
Other factors like the weakening dollar, the Federal Reserve not increasing interest rates and concerns about the Trump regime are also propping up gold prices. “We expect gold prices to remain range-bound with an upward bias in the coming months,” says Hareesh V , Research Head, Geofin Comtrade.
Since international gold is dollar denominated, the two share an inverse relationship. Dollar has slipped against major currencies and experts don’t see any let up on that front. Only a rate hike by the Federal Reserve can strengthen the dollar, but it keeps getting postponed. Conflicting economic signals by the Trump administration is another factor keeping the dollar low.
Join us on facebook https://www.facebook.com/LandisRefining/