Gold prices have climbed above the $1300 mark to 10 month highs amidst continuing geopolitical tensions and in the wake of Hurricane Harvey. As of the noon hour on August 29 the yellow metal was hovering around the $1320 mark. On August 28 North Korea fired a ballistic missile over Japan, once again igniting tensions. The Dow Jones Industrial Average was down sharply to open trading today but has since rebounded. In any case recent developments have generated positive trends for gold that could lead the metal to challenge its 2016 highs.
The U.S. dollar has been weakening steadily since early 2017. The dollar surged after the election of Donald Trump under the presumption that interest rates were due for a steady rise and that the administration would be able to successfully carry out its pro-growth policies. However, the illusions of easy legislative victories have been shattered after the defeat of the healthcare appeal in the Senate. Moreover, the White House has been plagued by controversy and resignations that have left the executive isolated and at times in conflict with his own party.
As tensions continue to simmer investors should keep a close eye on developments within the United States. Tax reform is the next big fish, and if the administration is unable to accomplish its goals in that area markets could react violently. Gold will be the benefactor as the presumptions that pushed it down in the first place will have been largely discredited.
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