Price of Gold – Fundamental Forecast, April 25, 2017

June Comex Gold futures posted a two-sided move early in the session on Tuesday as investors continued to react a little to the French election results, but mostly to renewed concerns over North Korea.

As far as the French election is concerned, I think investors are ready to move on after Emmanuel Macron and Marine Le Pen advanced to a presidential run-off. Both candidates were expected to finish first and second respectively so there was no surprise there. The selling we saw on Monday was related to position-squaring from speculators betting on an unusual or unexpected outcome.

As it stands, Le pen and Macron will now face off again on May 7. Current polls show Macron easily beating Le Pen in the second round. So we’re not likely to see gold react much too any news from France unless the polls begin to show Le Pen gaining in popularity.

The focus for gold traders this week is going to be primarily on North Korea. Safe-haven demand is likely to remain strong amid tensions over North Korea’s nuclear and missile program.

On Monday, U.S. President Donald Trump said the U.N. Security Council must be prepared to impose new sanctions on North Korea as concerns mount that it may test a sixth nuclear bomb as early as Tuesday.

Gold traders are also watching Washington as a possible government shutdown this week-end looms. The deadline for the government shutdown is Friday, April 28.

The government process occurs when Congress fails to pass legislation that funds key aspects of government, therefore forcing certain agencies to cease operation. Congress must reach a deal concerning the U.S. budget by Friday, April 28^th. If they don’t do so, the government will shut down on Saturday, April 29^th at 12:00 a.m.

At this time in the negotiations, the Trump Administration wants to include funding for a border wall in the budget. Trump as also threatened to withhold Obamacare subsidy payments if Democrats don’t negotiate. The Trump Administration has offered the Democrats a trade:  for every $1 of Obamacare subsidy payments, there will be $1 set aside to help build the wall.

Currently, the government may have excess cash on its books to keep running past the shutdown date and may even stay solvent for several more months, but this will not be a very good sign so investors are going to act accordingly. Due to the uncertainty created by the situation, they’re likely to move money out of higher-risk assets into safe-haven assets like gold.