This morning finds geopolitical events continue to dominate the headlines. Following on the heels of the losses in the Chinese stock market, tensions are at heightened levels in the middle east as Saudi Arabia and Iran have suspended diplomatic ties. This morning brings news that North Korea is claiming they have successfully tested a hydrogen bomb. The market reactions have been a global sell-off in equities while gold has benefited from those seeking a “safe haven”. While physical demand has been a bit disappointing to begin the new year, this morning’s news has propelled gold above resistance at $1,085.00 with additional gains likely to heat up our corner of the market. Silver continues to lag behind gold as witnessed by the gold / silver ratio which is moving towards 78.00. Platinum and especially palladium are taking it on the chin this morning as they follow crude oil which has fallen below $35.00 this morning and is down over three percent.
Recent U.S. economic data has been mixed with manufacturing and home sales missing economic forecasts while this morning’s ADP payroll report came in better than expected for December. Lastly, Fed Vice Chairman Fisher, in his first interview since the rate hike last month, indicated the FOMC is likely to raise rates four times this year. With all the uncertainty in the world, I would expect gold to continue benefiting from its safe haven appeal. If gold continues to probe higher, resistance can be expected at $1,111.50 which is the 100 day moving average. A continuation of USD strength and falling crude oil likely sends gold back towards $1,050.00.