Talking Points:

  • Gold prices rise as North Korea tests another nuclear weapon
  • Continued risk aversion may sustain advance to 11-month high
  • Crude oil prices may remain in digestion mode below $48/bbl

Gold prices struggled to make hay of disappointing US labor-market statistics Friday, echoing the impressive resilience of the US Dollar following the outcome. Geopolitical jitters have pushed the metal an 11-month high however after North Korea conducted another nuclear weapon test. That sent capital fleeting to the safety of government bonds and pushed down yields, boosting the appeal of non-interest-bearing assets.

Looking ahead, risk aversion may continue to give prices a boost as European exchanges take their turn to price in the latest developments on the Korean peninsula. Indeed, futures tracking the FTSE 100 stock index are pointing decidedly lower ahead of the opening bell in London. Follow-through may be choppy however with markets in the US closed for the Labor Day.

Crude oil prices were likewise muted Friday, with the WTI benchmark seemingly in digestion mode after the prior day’s spirited advance. The quiet may prove lasting in the near term, with a dearth of top-tier scheduled event risk compounded by an early session close (17:00 GMT) courtesy of the US holiday. Stray headline risk remains a potent threat however, particularly if thin liquidity conditions amplify kneejerk volatility.

What are the fundamental forces driving longer-term crude oil price trends? Find out here!

GOLD TECHNICAL ANALYSISGold prices are probing above the 23.6% Fibonacci expansion at 1326.38, with a daily close above that opening the door for a test of the 38.2% level at 1344.04. Alternatively, a move below support at 1315.49, the 14.6% Fib, exposes the 1295.46-97.83 area (double top, August 31 low, trend line).

Gold Prices Rise to 11-Month High on North Korea Nuclear Test

Chart created using TradingView

CRUDE OIL TECHNICAL ANALYSISCrude oil prices continue to test the upper bound of the down move started in early August, a barrier bolstered by the 23.6% Fibonacci expansion at 47.53. A breach above that confirmed on a daily closing basis sees the next key threshold at 48.75, the 38.2% level. Alternatively, a move below the August 31 low at 45.57 exposes a falling wedge floor at 44.58.

Gold Prices Rise to 11-Month High on North Korea Nuclear Test

Chart created using TradingView

--- Written by Ilya Spivak, Currency Strategist for DailyFX.com

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