Gold Takes a Breather

Gold has been surging amid the weakness in the dollar on the back of growing tensions between the US and North Korea. Pyongyang put on a massive military parade showcasing its capability over the weekend, which was followed by a failed missile launch. Ongoing tension in the Korean peninsula is likely to keep the markets nervous over the near-term as two more US aircraft carriers steaming towards the Korean Peninsula.

With the French elections beginning in under a week’s time, uncertainty is high, and should be enough to maintain safe-haven demand for gold. Bullion reversed from a five-month high in Monday trading, with $1300 as the immediate resistance on the upside.  A close above this level could see prices rally all the way to $1320. Bullion was last seen trading around $1283 per troy ounce on Tuesday.

Conditions in the Australian labour market have been somewhat weaker than what was expected, minutes from the April meeting of the Reserve Bank of Australia showed. The Central Bank noted that growth in housing credit continued to outpace household incomes growth, suggesting that the palpable risks associated with household balance sheets and the housing market had been rising. In order to balance the subdued labour market with the escalating household debt, policymakers decided to leave interest rates steady at 1.50%.

Investors are now awaiting the release of next week’s quarterly inflation figures to help refine their monetary policy and interest rate outlook. The AUDUSD pair has been tumbling since the minutes were released, with the pair currently trading around 0.7550. Furthermore, growing geopolitical tensions continue to spur capital flight to safe-haven assets like gold and Japanese Yen and away from risk assets like the Australian dollar.