Kings Of The Gold Bluff

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Includes: ABX, CDE, DUST, GDX, GDXJ, GG, GLD, GOLD, IAU, NEM, NUGT, SLV, WPM
by: Markos Kaminis
Summary

Gold recovered and rose intraday yesterday as the North Korean threat garnered media attention.

Fiery public statements from both the leaders of North Korea and the United States served to stir fear in financial markets.

The risks of a war with North Korea are relative to American securities and its currency, and so gold gained in value.

However, I see the statements by both leaders as bluffs that will fade in weighting with time. As a result, gold gains should be short-lived.

The key factor for metals now is working against precious metals. It is U.S. economic strengthening and likely Fed monetary tightening.

Gold started the day lower yesterday right on schedule as the U.S. dollar stabilized and as risk assets gained steam. The catalyst was clear, a strengthening U.S. economy with positive developments overseas as well. And then the kings of the gold bluff, Kim Jung Un and President Trump, began sabre rattling. Gold moved higher, and into the green into the close of trading. However, I expect this too shall pass, and prove to be yet another bluff for gold. The question is, how far will investors buy into the bluff before it is proven so.

GLD Chart for August 8 2017 GLD Chart for August 8, 2017

"Fire and fury," President Trump stated would rain down on North Korea "like the world has never seen." If believable, those are the types of statements, when made by the leader of the free world, that can send gold and precious metal relative securities sharply higher. But does anyone really believe President Trump, or Kim Jung Un for that matter, would really engage in a war that would forever be known as an avoidable bloody massacre, and possibly the worst in history?

The U.S. dollar is threatened because new information indicates North Korea can reach the United States and possibly with nuclear warheads. That combined with fantastically worded threats that most in the American government are well-accustomed to by now, has the U.S. president saying things out loud that are probably better said in one-on-one phone discussions with the opposition and/or its allies. The effect of these public statements is to stir fear, not only in our enemies and allies, but in our own financial markets.

Precious Metals Security 08-09-17
SPDR Gold Trust ETF (NYSE: GLD) +0.3%
iShares Gold Trust ETF (NYSE: IAU) +0.2%
iShares Silver Trust ETF (NYSE: SLV) +1.5%
VanEck Vectors Gold Miners ETF (NYSE: GDX) +0.2%
VanEck Vectors Junior Gold Miners ETF (NYSE: GDXJ) +0.1%
Direxion Daily Gold Miners Bull 3X Shares ETF (NYSE: NUGT) +0.2%
Direxion Daily Gold Miners Bear 3X Shares ETF (NYSE: DUST) -0.4%
Goldcorp (NYSE: GG) -0.1%
Newmont Mining (NYSE: NEM) -1.2%
Barrick Gold (NYSE: ABX) -0.4%
Randgold Resources (NASDAQ: GOLD) -0.3%
Wheaton Precious Metals (NYSE: WPM) +0.5%
Coeur Mining (NYSE: CDE) -0.1%

So we saw precious metals relative securities that track metals' values gain in value yesterday as a result, though many miners did not turn the day around. Gains could continue for a day or two longer as the media grabs full hold of this topic. However, I would not chase the gains in gold, as I give high probability to their cause being bluff-based, and the move being temporary in nature.

I reiterate, the short-term driver against gold and silver prices is powerful and real. A robustly improving U.S. economy serves U.S. dollar stability and strengthening, Federal Reserve monetary tightening and investment in risk assets (not safe havens). The most supportive factor for gold and silver is the possibility of inflation spiking surprisingly, and there is relative data due this week in that regard. Even a market correction should not work sustainably for gold if one occurs over the next couple months. I'll explain why in a near-term report. For more of my work on precious metals, readers are welcome to follow the column here at Seeking Alpha.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.