On holiday last week, I am missing the nuance of the past few trading days. We suggested that the technical picture was looking positive with the caveat that $1,355 on a close basis was necessary to create further upside momentum. Looking at last week's charts, traders were unable to push gold through this level.
The weakness overnight was generated from two factors. The first was North Korea's statement that it was prepared to suspend its nuclear program. This may prove to be a ploy to get the U.S. to the negotiating table. It squarely puts the onus on the U.S. to follow through on the meeting. Backing away now will create the perception that the U.S., not North Korea, is the impediment to peace on the peninsula.
The second is the U.S. 10-year bond, which is approaching a 3% yield. The increase in yield has pushed allocations into the $U.S. and hit the commodity space. Silver, which has been reacting positively in response to stronger oil prices, has also backed off its recent highs, as oil prices weaken against the quieter geopolitical landscape.
Technically, gold needs to hold support at $1322 and requires a break above the $1,337 area to spark new interest.