Following a strong rally last week as the world appeared to be flirting with an unthinkable nuclear conflict, the precious metals sank to begin the week. It seems traders are aggressively taking profits thanks to the run-up in gold prices, especially now that tensions on the Korean Peninsula are slowly but surely cooling off.
After peeking back above $1,290/oz last week, spot gold met strong resistance at the $1,295 mark. Silver prices fell even further, threatening to wipe out all of August's gains.
Here are Tuesday's spot prices, as of late in the first hour of trading:
Gold: $1,270/oz (-$11.60, -0.91%) Silver: $16.62/oz (-44¢, -2.58%) Platinum: $956/oz (-$11, -1.14%) Palladium: $880/oz (-$6, -0.68%)
In addition to the metals falling, bonds likewise saw a considerable sell-off to begin this week. The 10-year Treasury note yield was pushed higher to 2.28%. Not surprisingly, the dollar was also sharply higher on Tuesday, gaining 0.7% on the DXY index to move above 94.0 for the first time in about four weeks.
The major impetus for this shift in the markets was the easing of tensions—even if only slightly—between the U.S. and North Korea. Indeed, any escalation of ill will between the DPRK and the Western world raises the alarm bells about the potential use of nuclear weapons or other weapons of mass destruction.
North Korean leader Kim Jong-Un has apparently changed his mind about firing missiles at Guam—but he naturally reserves the right to change his mind back. It luckily appears that cooler heads are prevailing, though the situation is far from resolved diplomatically. At least the immediate aversion of a military conflict has helped drain the gold market of safe-haven demand.
Moreover, racial tensions on the home front culminated in rioting and tragedy in Charlottesville, Virginia this weekend. A group of white nationalist demonstrators got into a confrontation with counter-protesters, and one deranged man drove his vehicle into the crowd, killing one woman and injuring dozens of others. If nothing else, the incident distracts President Trump and U.S. lawmakers from their priorities to get the economy going through tax reform, infrastructure projects, and other initiatives.
In other economic news, retail sales in the U.S. rose more than expected in July, growing 0.6% versus expectations of a 0.4% rise. This was actually the best monthly gain for retail so far in 2017, offering some indication that the third quarter may see an accelerating rebound for the battered retail sector. June's sales figures were also revised slightly higher by the Department of Commerce. Year-on-year, July's retail sales rose by 4.2%.
The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.