The headlines surrounding tensions between North Korea and the United States continue to increase in frequency and severity. Up until this week, the back-and-forth intimidations from North Korean dictator Kim Jong-un and US President Trump occurred, in general, a few weeks apart. Now they’re occurring multiple times a day. Earlier in the week, North Korean officials declared that the US “would suffer a shameful defeat and final doom” if it “persists in extreme military adventure, sanctions and pressure”. The statement went on to say that officials “vowed to mercilessly wipe out the provocateurs making desperate efforts to stifle” North Korea. Last night, North Korea said it would have a plan ready within days to fire four missiles near the US Pacific territory of Guam. President Trump responded to these threats in kind earlier in the week by saying that North Korea “will be met with a fire and fury like the world has never seen”. He reiterated that point today by saying “maybe it wasn’t tough enough”. US Defense Secretary James Mattis backed up Trump’s rhetoric yesterday when he issued an ultimatum to North Korea to “cease any consideration of actions that would lead to the end of its regime and destruction of its people”.
The situation with North Korea is escalating rapidly and gold has reacted accordingly over the last three days. After holding support at the 50 and 100 day moving averages in the low $1,250s on Tuesday, gold has shot up and looks poised to test the year’s highs, and the double top, at just under $1,300. There should be plenty of action around $1,300; if spots are triggered and it breaks through, the next area of resistance is $1,350. Silver is still lagging but has even more potential than gold to make a big mover higher considering that speculative Comex positions are still quite short. A break of $1,300 in gold could allow silver to test its highs of the year at $18.50.