The day off in the United States had a huge impact on the volatility of trading on Monday. The whole day the gold price spent in a narrow range and only this morning the quotes managed to get out of the range. As a result, even geopolitical factors could not stir up the market in the absence of large traders from the United States and Great Britain.
Today liquidity and volatility should return to the market. Gold is still strongly influenced by geopolitical, as well as economic factors.
The geopolitical situation in the world is the most important and interesting questions now for the markets. On the one hand, we see successful negotiations with North Korea, which reduces the risks and, accordingly, the demand for defensive assets. On the other hand, at the weekend, domestic political tension in Europe has sharply escalated. The acute political crisis in Italy, as well as a possible vote of no confidence to the Prime Minister of Spain, significantly increase the risks for investors who are likely to seek refuge in more safe assets. Accordingly, now the question arises of which factor will outweigh. In our opinion, the problem in Europe is more acute now, because it is more serious in its scope and significance. Secondly, investors are already accustomed to the problem of North Korea and are not so acutely responsive to this situation. Therefore, in general, we should expect an increased demand for safe-heaven, which will provide significant support to precious metals.
In general, the growth potential for the gold is still significantly limited by the strong USD dollar and high yield of US Treasury bonds. The dollar continues to gain as investors expect the next rate-hike in June, which always negatively affects gold. In addition, today we will see a confrontation of geopolitical and economic factors for influence over the market, and the outcome of this struggle will determine the further direction of the gold movement.