Precious Metals News Update - 7 March 2018

Hello everyone,
 
Where to begin?
 
Markets have been roiled over the past few days by a handful of events but arguably the one causing the most consternation amongst investors being the announcement last Friday by President Trump of his intention to apply across the board tariffs of 25% on imported steel and 10% on imported aluminium on the grounds of ‘national security’.  Appeals from US allies and from some members within his Administration to desist, as well as threats of retaliation from some trading partners (the EU) and the attendant hue and cry of “Trade Wars” from the usual suspects in the media, somewhat belie the fact that US interests are already subject to tariffs in various jurisdictions (e.g. the European Union applies a 10% tariff to US vehicles vs the 2.5% tariff applied to European automobiles imported into the USA). All this notwithstanding, the “Trade Wars / Tariffs” issue claimed its first scalp today with the announcement this morning at the commencement of trading in the Far East that President Trump’s senior economic adviser, Gary Cohn has handed in his resignation and is to leave the White House (Mr Cohn unable to reconcile his avowedly anti-protectionist views with the US President’s ‘America First’ agenda).
 
Earlier in the week the results of the recent Italian elections delivered a ‘hung parliament’ as support shifted away from the ‘establishment’ centre-left parties towards centre-right, anti-establishment parties and political horse trading has ensued as various parties attempt to cobble together a coalition that can form government which turned the focus away from the US to Europe for a brief period.
 
Without the results from Italy, the markets already had plenty to contend with this week including (but not limited to):

• Monetary policy meetings for the Reserve Bank of Australia (yesterday - unchanged), the Bank of Canada (Wednesday), the European Central Bank (Thursday - expected ‘unchanged’) and the Bank of Japan (Friday - expected ‘unchanged’)

• The National People’s Congress (China)

• Friday’s all-important US Bureau of Labor Statistics monthly employment data release which includes the headline ‘Non-Farm Payrolls’ figure for February (expected +200K)

Newswires were busy overnight. First, the FT carried a story that North Korea had indicated that it was willing to abandon its nuclear program "if regime security can be guaranteed.” President Trump tweeted that “Possible progress being made in talks with North Korea. For the first time in many years, a serious effort is being made by all parties concerned. The World is watching and waiting! May be false hope, but the U.S. is ready to go hard in either direction!”
 
Bloomberg published a headline quoting a Trump ally as stating that the President was “open to changes on tariffs." only for direct comments from President Trump during a joint press conference with the Swedish Prime-Minister that he remained unswayed and that "we're doing tariffs on steel." as well as; “U.S. has been taken advantage of on trade for many years”, “EU has been `particularly tough' on U.S. in trade”, “EU could make deal that'd obviate tariff need” - the EU had threatened in-kind tariffs of 25% on a targeted range of US goods including Levi jeans, Kentucky bourbons and Harley Davidson motorcycles (all of which are located in Republican held states).
 
All the tumult has led to gold moving freely between the extremities of a wide trading band as it reacted and adjusted to the reactions of US equity, treasury and currency markets to each dizzying development.
 
Gold ‘popped’ higher resulting from Gary Cohn’s resignation this morning during the Far Eastern open and technically this allowed XAU/AUD to convincingly pierce the substantial topside resistance at AUD 1715.00 (high so far 1722.00) but only a close above this level (AUD 1715.00) would signal that a potential breakout to sustained higher levels has commenced.
 
Between its well-established USD 1306 to 1366.00 trading band, XAU/USD remains what is referred to cheekily by some technical analysts as a ‘J-Lo’ proposition (i.e. the market looks great at the top and horrible at the bottom).
 
No shortage of entertainment but given the surfeit of ‘headline risk’ that is currently prevalent, prudence dictates additional caution when assessing the next moves. Red or black?
 
Good luck.
 
Regards,
Andre