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Why Trading On Trump's North Korea Misstep Won’t Work

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Asian markets dipped Friday and remained shaky after Trump cancelled the much-anticipated, would-be historical, face-to-face with the North Korean leader in an unfolding drama that has become akin to watching a season of The Bachelor

Falling overnight on news of the cancellation early Thursday, some Asian markets pared losses later, after North Korean leader Kim Jong Un said he would still be open to talks, even after Trump threw down the nuclear weapons gauntlet.

(Click to enlarge)

Source: CNN

On Friday morning, North Korean Vice Foreign Minister Kim Kye Gwan said Pyongyang still hoped for a “Trump formula” to save the day, and suggested the rogue regime was still open to find a solution.

These statements followed Trump’s withdrawal from the meeting after a North Korean official insulted Vice President Mike Pence, calling him “a political dummy”. In officially cancelling the June 12 meeting, Trump noted the recent “tremendous anger and open hostility” show by Pyongyang.

Trump also noted that our weapons are bigger than theirs but would rather not have to prove that.

Citing “multiple sources” NBC said Trump feared Kim Jong might try to cancel first and the White House wanted to be the first to make that move.

It is, after all, very much a game of negotiations, and Trump is taking this to a new level of artistry Related: Cryptocurrencies Bounce Back But Struggle With Key Resistance Levels

And while the market continues to respond to Trump with knee-jerk reactions that change on a dime, investment advisors are circling around with tips on how to make money on this drama. But beware: What the market sees as risky today, it may not see as such tomorrow.

After losing some 250 points on Thursday over North Korea fears, the Dow signaled a stronger open Friday morning.

Market sentiment is changing as fast as Twitter can tweet.

Many will tell you to flock to gold, the safe haven asset. But lately that only works if you’re in an out, playing the brief spikes and selling before fears ease within a 24-hour period.

“Trump’s scuttling of the summit with North Korea is not surprising, but it still produces an uptick in geopolitical uncertainty, which is bullish for safe-haven gold and silver,” Kitco senior technical analyst Jim Wyckoff wrote.

Indeed, gold prices went up more than 1 percent Thursday, reaching above $1,300 an ounce. June gold futures were up 1.23 percent yesterday, as well, to $1,305.40.

(Click to enlarge)

Phillip Streible, senior market analyst at RJO Futures, told Kitco he expects all the geopolitical uncertainty to but the gold bulls back in charge.  

 “Gold is benefitting from geopolitical issues but the Fed is clearly not concerned with rising inflation and that is giving investors more confidence,” he said. “If gold prices can close above $1,300 an ounce, then I would suspect the market will take a run at the 200-day moving average at $1,316 an ounce.”

By Friday morning, though, gold was already down a bit to $1,304.77:

Source: Goldprices

And this is where Trump trips us up. It’s difficult to play North Korea on the markets, and it’s difficult in general to play geopolitical uncertainty right unless, unless your day-trading.

There is no longer a short-term or medium-term market outlook that is feasible. It’s either immediate-term (day-trading) or long-term (Warren Buffett-style)

Consider this when you think you might want to try to make money off the North Korea drama: Trump brought us to the brink of a global trade war with moves against China that he then walked back. Trump withdrew from the nuclear deal with Iran, but then suggested sanctions waivers. He banned U.S. companies from selling to Chinese tech giant ZTE, and then reversed that. He also back-tracked on some key Russia sanctions.

North Korea isn’t over, and talks may still move forward. This is all a negotiation in progress, and the only uncertainty here is what comes with trying to pin down the pattern, but the pattern is already emerging and it’s shouting at everyone to stop trading on headlines and tweets.

By Josh Owens for Safehaven.com

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