Senior Trader Update- Gold Breaks Out of Multi-Year Downtrend

Good morning everyone.
 
If gold is the thermometer that reflects the health of the global economic and geopolitical body at any moment in time, then the yellow metal’s rally overnight to the mid-April high (in USD terms) appears to be signalling that all may not be well. The prognosis may carry additional weight given the level of support in spite of the old tried and (relatively) trusted aphorism “Sell in May and go away”, which references the period between May and the start of September when the markets slip into a torpor due to impact of the northern hemisphere summer vacation period.
 
In this vein, fear and uncertainty assumed the mantle from economic data as the main driver of a higher gold price. Investor worries surrounding rising geopolitical tensions in the Middle East (Qatar and Syria) and North Korea, as well as perceived debt & consumption-driven asset bubbles (including crypto-currencies, stocks and properties), all appear to have found expression via a safehaven / flight to quality bid underpinning the gold price.
 
It was reported that Qatar received a 10 point “comply or die” ultimatum from Saudi Arabia via intermediary Kuwait overnight, with SkyNews Arabia reporting that the desert state had been given 24 hours to acquiesce to the terms of the ultimatum, including ending all ties to the Muslim Brotherhood and Hamas or face the consequences (a likely euphemism for military action). While this was the narrative being carried by the mainstream media, various analysts pointed towards the escalation of the aggressive tone taken with Qatar as a means to ultimately engage Iran (not to mention the small matter of Qatar’s strategic value as the largest exporter of Liquefied Natural Gas – LNG).
 
In Syria, the US-led coalition destroyed pro-Assad government forces it claimed had entered the recently established deconfliction zone. This led to criticism by Russia and calls for an extraordinary UN Security Council meeting. Additionally, a member of the Defence and Security Council of the upper chamber of the Russian parliament said that “The strike is a step by the US towards engaging in an open conflict in Syria, and an act of aggression,"
 
While these events moved to the forefront yesterday, they do not detract from other matters creating uncertainty, including the outcome of Thursday’s UK General Election and the US Federal Reserve’s MonPol announcement later this month, to name a few.
 
Yesterday’s commentary noted the need for precious metals’ bulls to provide the ‘juice’ to further the advance and they have certainly been given reason to do so. Both XAU/USD and XAU/AUD have now recorded a healthy sequence of higher highs and higher lows and the November 8th 2016 highs at AUD 1760 and USD 1337.50 beckon. The last impediment remains the psychological ‘big figure’ at USD 1300.00/oz.
 
Good luck.
 
Regards,
Andre