Gold Price Leapfrogs $1,300 As Floods, North Korea Grab Headlines

Wednesday, August 30, 2017

The price of gold, which has been hanging in the $1,200’s per troy ounce nearly all year, finally saw a breakthrough into $1,300 in recent weeks. Last year’s spike in gold price came as a result of the fallout over the Brexit vote—a tumultuous event, if some prognosticators were to be believed—but this year’s gold price has moved into $1,300 on a tide of very different set of headlines.

gold price chart

Source: APMEX.com

Hurricane Harvey Sending Investors to Hedge?

The most obvious headline is that of Hurricane Harvey and the devastating effects it’s had on the people of southeastern Texas. According to MarketWatch, “Gold had logged gains in each of the last three sessions as North Korean jitters and the still unfolding record-setting impact from Hurricane Harvey drove investors into haven assets.” Regular readers of this space know just how powerful gold’s demand can be when driven by the need to hedge against other assets. It’s possible that those looking to store wealth in the aftermath of the hurricane’s effect on the U.S. as a whole are flocking to gold.

The year-to-date gold chart, provided above, shows that gold’s increases have been cyclical as of late. It’s possible we have yet to see gold retreat in its current cycle. Watching the U.S. Federal Reserve will be even more intriguing, as the Fed figures out how to deal with an economy temporarily focused on relief efforts.

North Korea Continues to Drive Haven-Seeking

The other headlines grabbing attention come from North Korea, which recently launched a missile over Japan. The event was so provocative that it even sent alarms throughout Japan, leading some to believe that war had come.

This obvious escalation on the part of North Korea has some wondering about the stability of the economy should tensions get even worse. It’s no secret that the current administration in the White House has its hands full with grave threats from both within and without.

Gold’s Reaction to Difficult Headlines

We’ve seen all year that gold has typically responded well to complicated headlines. Its role as a hedge investment—especially as some people see weaknesses in bonds—suggests that there is more to the price of gold than merely a counter to the U.S. dollar.

Given how tumultuous 2017 has been from a political point of view, the long-term trend of gold to recover from many of its late 2016-losses should have been, in retrospect, easy to predict. But that doesn’t mean all the headlines have been bad, either. The second-quarter GDP was recently revised up to a more optimistic number of 3%, for example. Both numbers were an increase over the first quarter, suggesting there is some momentum that may keep stocks high for the short-term.

Even so, now may be a time to invest in gold, particularly if there is more room for stocks to go and the U.S. dollar potentially keeps some downward pressure on precious metals. Right now, the focus should be on southeastern Texas as it deals with the fallout of Hurricane Harvey.

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Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.