The reason for gold’s surge

The recent surge in gold prices were well expected due to much uncertainty in markets.

While the yellow metal has been consolidating sideways for many days around US$1,260 per ounce prior to June 2, the release of US non-farm payroll that evening was under the median forecast.

Earlier on the same day, US President Donald Trump announced the withdrawal from Paris Climate Treaty which offended many European leaders.

Debate erupted on multiple issues encompassing this subject when Trump tried to bargain for a re-negotiation.

Leaders from France, Germany and Italy rebuked and rejected his request by stating firm compliance to the pre-set conditions.

Following this, the US Dollar Index lost ground. The market dropped below the 98.00 level right after Trump’s announcement and kicked up demand for gold as a safe haven.

Moreover, the weak job data has discounted many analysts who was previously confident that an impending rate hike may surface in June.

Meanwhile, the UK has been under the menace of terrorism and suffered another impact when a van rammed into London Bridge on June 5.

Three attackers jumped out of the vehicle and stabbed the crowd randomly causing seven dead and 48 injured.

Following this, gold prices surged amid fear of uncertainty despite US payroll showing noninflationary status.

Currently, London is filled with anguish surrounding the General Election.

A week earlier, public survey showed the waning confidence of Theresa May in leading Conservative Party.

Media sources quoted the ruling party may even lose majority seats in Parliament.

On the other hand,crude oil prices did not stand firm above US$50 per barrel despite OPEC has agreed to extend supply cut till March 2018.

The global glut continues to pose as a peer to Crude prices as US shale producers expand daily production to over five million barrels.

Naturally, the flight off energy market went into gold and silver again for inter-hedging purposes.

In June, we forecast the gold prices may top US$1,320 per ounce before profit-taking rattles into market.

Uncertainty of economic fundamentals and geo-political risk will be main catalysts to push the precious metals higher as investors seek safe haven for their fund.

In our opinion, the Trump administration will persist in pushing the stock indexes and precious metals higher until August season till the new taxreform will be revealed.

The US dollar will probably weaken as a counter-balanced tool. Start to re-balance your portfolio today.