Gold prices climbed to two-month highs on Friday, rising for the third straight day as investors sought refuge amid escalating tensions between North Korea and the United States, while bullion also received support from weak U.S. inflation data. Spot gold was up 2.41 percent to $1,289.31 an ounce for the week, and set for its biggest weekly gain since mid-April. It earlier hit $1,291.86, its highest level since June 7.
Geopolitical risks between North Korea and the United States boosted demand for assets considered safe-haven investments, such as gold, silver, Swiss franc and yen. Data on Friday showed U.S. consumer prices and producer prices rose less than expected in July, eroding expectations of an interest rate hike by the Federal Reserve at its December monetary policy meeting. The Fed is not going to be in any rush to increase the interest rate this year, which was also supportive to gold.
On technical front, gold rose to around $1,290, the highest since June, and is expected to test year-to-end high of $1,295 and the key mark of $1,300. Signs of narrowing gains reminded investors to closely watch the progress of tensions between North Korea and the United States. We recommend two trading strategies: 1) long gold and set stop-loss if geopolitical tensions escalate; 2) build short positions if risks is overall controllable, and cash in profits as gold prices are expected to fall once the tension eased.
Silver tracked gold, rising for the fifth consecutive day. For the week, it closed up 5.22 percent at $17.12 per ounce. On technical front, silver held above the 200-day moving average of $17.07. Investors shall closely watch pullback risks as the RSI is approaching the overbought range, and evaluate the strength in coming sessions. On trading strategy in the near term, investors could follow that of gold and closely watch the progress of tensions between North Korea and the United States.

 
Dealing Room, ICBC Beijing Branch
Qin Gang

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