Escalating tension in the North Asian region scared away many investors and triggered broad sell-offs in riskier assets on Monday. 

Asian equities opened lower and dived deeper into negative territory on Monday, after South Korea detected that Pyongyang is preparing for a possible intercontinental ballistic missile (ICBM) launch, deepening the region’s nuclear crisis. 

South Korea is preparing for the full deployment of a US missile defence system, ‘Thaad’, and a US carrier group in response to North Korea’s military threat. 

Heightened geopolitical tension will probably bring a negative impact to the region’s economic growth, with tourism and the hospitality sector potentially impacted. 

South Korea (-1.2%), Japan (-0.93%) and Singapore (-1.4%) were among the worst performing Asian markets yesterday. European stocks ended lower while US markets were closed for the Labor Day holiday.  The gold price held ground at around the US$1,335 area, which is also a key resistance level (100% Fibonacci extension).

Many market watchers believe that the room for a diplomatic resolution of the crisis on the Korean peninsula is now rather limited, and the risk is rising of wither a US military intervention, or miscalculations by Pyongyang. 

The South Korean and United States ambassadors held a meeting in the United Nations Security Council on Monday. Both sides urged other nations to cut off the supply of oil and other to North Korea in an attempt to resolve the stand-off, using sanctions rather than military means.

Another key variable in these developments is the response from China, widely considered to be North Korea’s most influential ally. Things are getting a little bit out of Beijing’s control now, unfortunately. The nuclear test overshadowed the BRICS Summit held in Xiamen, where President Xi met with other emerging market leaders to discuss trade and multilateral cooperation. 

Technical Analysis:

Silver - Cash

  • Break-out key resistance level of 17.76 
  • 10-Day Simple Moving Average sloped upwards
  • SuperTrend (10,2) is sloped upwards, suggesting the uptrend is intact
  • Momentum indicator DMI remains in a bullish setup 

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.