• Geopolitical concerns loomed over some financial markets for a second day, as sabre-rattling over North Korea’s nuclear weapons program sent the yen and gold higher. Asian stocks staged a turnaround.
• Japanese and Hong Kong equities reversed early declines, led by gains in automakers and technology companies. The yen climbed with gold for a second day after North Korea’s missile launch fanned concern the country is closer to building a device capable of hitting the US. Oil retreated after climbing for eight straight sessions. US equity and bond markets are set to reopen after the July 4 holiday.
• North Korean leader Kim Jong Un’s actions further escalate tensions over his nuclear ambitions and show how efforts to rein him in - from international sanctions to US and Chinese pressure - have not worked. The US. confirmed the rocket launched on July 4 was an intercontinental ballistic missile, with Secretary of State Rex Tillerson calling it a “new escalation of the threat” to the US and its allies that would be brought before the United Nations Security Council.
• Markets in the past have shown a capacity to quickly move beyond periods of tension on the Korean peninsula following short bouts of risk aversion. Political turmoil on the Korean peninsula comes ahead of the G-20 summit in Hamburg this week as the United Nations Security Council prepares to host an emergency meeting on Wednesday.
Elsewhere, the Federal Reserve is due to release minutes from its June policy meeting, the latest clues for investors on the path for U.S. interest rates ahead of Friday’s key jobs report. Equity investors this year have put their faith in a global economic recovery, helping spur all-time highs in global stocks, whereas bond buyers appear less sanguine on the outlook, doubting Fed rate-hike plans.
• Hedge funds and other money managers reduced their net long positions in COMEX gold and silver for a third straight week in the week to June 27, U.S. Commodity Futures Trading Commission data showed.
"The prevailing threat of geopolitical tensions is likely to cause a knee-jerk reaction to safe-haven assets with bullion up over 8 percent for the year," Sucden Financial said in its quarterly report.
• Silver slipped 0.1 percent to $16.06 an ounce, after touching its lowest since May 9 at $16.01.
• Boris Mikanikrezai, precious and base metals strategist for FastMarkets, in his Gold Weekly report Tuesday. He highlighted the latest CFTC Commitment of Traders report (COTR), which showed that money managers cut their net long positioning for a third straight week over the reporting period (June 20-27).
However, even if speculative sentiment seems to be turning negative, which could lead to lower prices, Mikanikrezai noted there are two developments that are encouraging.
• “First, gold remained broadly resilient in spite of the magnitude of the wave of speculative selling over the reporting period, which suggests perhaps the presence of physical buyers ready to support prices,” he wrote.
• “Second, the net spec length in gold now represents just 27% of its record, suggesting that there is limited room for additional speculative selling.”
“The fact that they were net buyers in June suggests that investor sentiment remains strong, with ETF investors inclined to accumulate on a steady basis,” he said.
“Going forward, I suspect ETF investors will continue to accumulate gold at a slow pace in order to have diversified portfolios, but the pace of inflows may become stronger in case of a sudden wave of risk aversion, forcing some too-complacent investors to boost their exposure to safe-haven assets like gold.”
“I need to see a firm daily close below the May low of $1,214 per oz before closing out my bullish bet and reassess the situation.”
Reference: Reuters,Kitco,Fin24,Business Standard
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