Gold bid despite Trump saying North Korea summit may still happen

Gold has managed to hold onto a significant chunk of its gains made yesterday despite the US trading conciliatory messages with North Korea again, something which has boosted the global stock markets and the US dollar. This comes after Donald Trump yesterday cancelled the June 12 meeting with Kim Jong Un, which triggered a risk-off response in the markets. Today however Mr Trump said: “We’ll see what happens. It could even be the 12th. We’re talking to them now. They very much want to do it. We’d like to do it.” It is worth remembering that even before the news hit the wires yesterday, gold was trading higher and it merely extended those gains on the back of the unexpected announcement. The precious metal then remained bid even though Trump did not completely rule out a meeting at a future date in his press conference while North Korea also expressed willingness to hold a meeting at any time and in any form. While stocks and Wall Street eventually ended yesterday’s session flat, there was no corresponding sell-off in gold. The metal’s resilience continued on Friday and at the time of this writing it was still holding its own above that $1300, despite the EUR/USD and GBP/USD hitting new lows on the month.

Gold’s puzzling price action may be explained away by looking at the chart. After the metal broke below $1300-$1307 support area last week, it was always going to come back and re-test this level in order to gauge the bears’ level of control. As well as prior support and resistance, the top of this range corresponds with the 200-day moving average and the bearish trend line. Thus, this should be an area where the sellers must defend if they are to remain in charge of the trend. A break above here would therefore tilt the bias to neutral and things would turn bullish should the most recent high around $1325 is reclaimed by the bulls. However, if the sellers do hold gold down below this resistance then it may take another leg lower in early next week. Short term support is seen at $1298.50, below which there’s not much further short-term levels until that 61.8% Fibonacci retracement level at $1286. The 78.6% level comes in at $1264.

So, in summary, gold is at a pivotal level and what it does next should tell us a lot about the level of demand or lack thereof for the precious metal.

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