8th September - How far can Gold go?
11 September 2017
TECHNICALS:
Gold futures weekly continuation chart
The move to the top of the trading range is clear.
But the bulls will need a breakup through the 1380.90 level to be convinced that the bullishness has another leg to go.
Gold Dec 2017 daily Futures chart
This is a powerful short-term move up through a well-established horizontal resistance fro the two Prior Highs.
On any pull-back expect 1307 to be powerful support.
FUNDAMENTALS:
Much of the value of Gold liesd in its role as the ultimate safe haven or hedge in times of extreme economic dislocation, distress and recession, but also at times of heightened geopolitical tension.
As the turmoil caused by the financial crisis subsided and the major economies returned to economic growth, Gold sold off from the all time highs of around US$2,000 and settled into a broad trading range.
Earlier this year, we expected Gold to drift lower, as the Federal Reserve began to reverse its exceptionally accommodative monetary policy and growth began to pick up in the Euro zone, leading to speculation that the ECB too would start to taper its own QE policy.
But in recent months those considerations have taken a back seat. The regime in North Korea has pushed on with its program of developing a range of missiles that threaten not only regional US interests and her allies, but also, it seems, the US mainland itself.
More worrying still, the North Koreans have also developed their nuclear capability , sooner than anticipated. In recent days they have tested a device thought to be a Hydrogen bomb that they claim can be fitted to an ICBM capable of reaching most of the mainland US.
This has understandably caused great concern in the US. The US and UN have already applied economic sanctions on North Korea in an attempt to force them to abandon their pursuit of developing these weapons, but to no avail.
The North Koreans are a very poor state, national GDP is around a negligibleUS28.0B and their people are at famine levels. But the Regime cares more about its own survival than feeding the Korean people.
The US has responded to the new heightened threat via President Trump’s rhetoric about unleashing “fire and fury” etc., which is a departure from the tone of previous US Presidents.
Although Trump has said all options, including military, are on the table, launching a pre-emptive strike against the North is fraught with all sorts of dangers. The North would almost certainly attack the south, causing massive loss of life, and would most likely attack Japan. If their claims about their nuclear capabilities are true they drop a nuclear weapon on a major US city.
The basic question here is this; is Kim prepared to commit suicide and risk an over whelming US response that would effectively wipe out North Korea, or is he grandstanding for not only domestic, but foreign consumption designed to secure his Regime?
However, if Kim is serious, and he has developed his weapons of mass destruction at a much-accelerated pace compared to his father, and thinks he can attack the US and somehow survive, the consequences do not bear thinking about. He would surely hit his Southern neighbour and Japan and the fall out would not only be a humanitarian disaster, but an economic one too, sending the US and global economy into a deep recession.
Although we think the risk of Kim launching an attack is not as great as his rhetoric sounds, we are equally concerned about Trump thinking he can attack Kim, which would likely miss some key installations and provoke Kim into retaliating.
In summary, although we think the risk of a nuclear exchange is still small, we judge the consequences of one occurring argue in favour of Gold making further gains and if the worst happens the market would make significant new highs.
The road ahead looks bumpy indeed!
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21st September - Wait and watch for a Dollar break 
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