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USAGOLD/Peter Grant/04-24-17
Gold remains lower on the day, as “risk-on” seems to be the order of the day following the French election results. However, the yellow metal is already more than $10 off the intraday low, buoyed by persistent geopolitical risks and a weaker dollar.
The outcome of the French election was pretty much as expected, with Macron and Le Pen advancing to the May 7 run-off. Europhile centrist Macron is widely expected to be the winner of that contest, which has reignited risk appetite amid a belief that there is little chance of a Frexit vote under his leadership.
Gains in the euro have pushed the dollar lower, with the dollar index engaged in a retest of the late-March low at 98.86. A breach of this level would mark a 6-month low in the greenback, providing additional support for gold.
North Korea is threatening to sink the USS Carl Vinson carrier group, while China is asking for both the DPRK and U.S. to exercise restraint. Chinese President Xi reportedly said that he “hopes all parties remain restrained instead of intensifying the situation.”
There is speculation that tomorrow’s anniversary of the Korean People’s Army on Tuesday will be marked by either a nuclear or ballistic missile test. That could be the provocation that elicits a military response from the U.S.
Meanwhile, in the Middle East, the top U.S. general in Afghanistan suggested that the Russians may be providing material support, including weapons, to the Taliban. If found to be true, it would be a serious escalation of tensions between the U.S. and Russians.
Oil prices have extended to the downside for a fourth consecutive day, touching the $49 level for the first time in about a month. The retreat in energy prices undermines the Fed’s contention the inflation is picking up, further tempering rate hike expectations for June.
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